- Fed's Waller: Supports 75 bps hike but would go higher if retail sales and housing strong
- More from Waller: You don't want to overdo rate hikes
- Nikkei interview: Bullard in favor of 75 basis point hike
- US June PPI +11.3% y/y vs +10.7% expected
- US initial jobless claims 244K vs 235K estimate
- May Canadian manufacturing sales -2.0% vs -2.0% expected
- BOC's Macklem: People will believe inflation is coming down when they see it’s coming down
- The UK conservative party 2nd round votes show Braverman eliminated
- Italy's government wins confidence vote in upper house despite 5-Star Movement boycott
Markets:
- Gold down $25 to $1709
- WTI crude oil up 26-cents to $96.41
- US 10-year yields up 5.2 bps to 3.05%
- S&P 500 down 10 points to 3794
- Bitcoin up 4.6%
- USD leads, JPY lags
It was another volatile day. The US dollar stormed ahead early and risk assets wilted on fears of a more-rapid pace of Fed tightening along with a deterioration in the economic outlook. The euro finally cleanly cracked parity and fell to 0.9953 but the real driver was the yen, which continues to be smashed as USD/JPY hit 139.39.
The theme was to 'sell everything' as even bonds slumped at the peak of the trade.
Then Waller flipped the script, or at least opened the door to it as he said it would take a material beat in retail sales on Friday and next week's housing data to convince him to support 100 bps. The Fed's Bullard took a similar view.
That completely turned around stocks as a 2% decline was essentially wiped out. Oil had broken the 200-dma and the April low but reversed $6 from the lows. US 2-year yields erased a 12 bps rise and finished 1 bps lower.
The turn in the dollar wasn't quite as complete but AUD and NZD finished nearly flat against the dollar --albeit with the help of a blockbuster Australian jobs report. The euro recovered back above parity but only at 1.0020, which is hardly a definitive rejection. USD/JPY didn't give back much.
Implied odds of 100 bps fell to 31% from 75% but it's conditioned on retail sales so that's what we'll be watching for tomorrow. Inflation expectations in the UMich survey will also be a factor.
