North American Summary and Highlights 16 May

North American session

The USD picked up, with UST yields, after the Preliminary May Michigan CSI showed inflation expectations surging still further, the 1-year view to 7.3% from 6.5% and the 5-10 year view at 4.6% from 4.4%. Sentiment fell to 50.8 from 52.2. USD/JPY saw highs above 146 from 145.50 while EUR/USD saw lows below 1.1150 from 1.12. GBP/USD was more resilient, sending EUR/GBP down to .84. AUD/USD was also resilient, recovering from a dip below .64. USD/CAD tested 1.40 without breaking, from 1.3950. Equities were resilient despite a brief dip after the data. 

Before the Michigan CSI April US housing starts rose by 1.6% but with single starts lower and permits falling by 4.7% the data looked quite weak, but saw little response. Fed’s Bostic was quite hawkish, seeing a slowdown but not a recession and only one easing this year.  

European morning session 

The USD was generally firmer through a quiet European morning session. EUR/USD dropped 20 pips to trade below 1.12 and USD/JPY gained 30 pips to 145.55. The EUR was firmer on the European crosses against GBP, CHF and SEK but slightly weaker against the NOK.  

There was no data of major significance, but the Eurozone trade surplus for March was much larger than expected at EUR36.3bn – the largest ever surplus. The EU surplus with the US was particularly large at EUR40.7bn, but looks to have been due to a tariff related surge in exports, which were up 60% on the previous year, so is likely to be reversed. Otherwise, there was little news of note, with Italian HICP inflation revised down slightly to 2.0% in April.