The dollar index eased from overbought levels as in-line U.S. data, quarter-end flows, and weakness in tech stocks weighed on Treasury yields. U.S. PCE inflation rose at a 4.1% annualized pace in May, its fastest in three years but broadly in line with expectations. Jobless claims held steady while price hikes from Apple and Microsoft added to inflation concerns. Chicago Fed President Austan Goolsbee said inflation is moving the wrong way, though the latest PCE report wasn’t entirely negative, with inflation clearly the main concern in the Fed’s mandate. Oil rose after a cargo vessel was hit by an unknown projectile near Oman, raising concerns over the pace of Middle East supply normalization. IMF said energy and commodity prices have fallen since the U.S.-Iran deal, though normalization in prices and Gulf trade will take time. Conflicting stances on Israeli troop withdrawals from Lebanon suggest a deal is not imminent. Iran’s top negotiator denied U.S. claims it would use unfrozen assets to buy U.S. agricultural goods. Iran estimates Strait service fees could generate about $40 billion annually for participating states, WSJ reported. EUR/USD rebounded from an oversold position above 1.13 on softer U.S. yields and a weaker dollar post-PCE, with a rising RSI and move back above its lower Bollinger supporting a constructive near-term bias. GBP/USD firmed on softer U.S. yields as hawkish Fed expectations eased, though gains were capped by equity weakness in tech and Iran-related tensions. USD/JPY held firm, printing a doji below the key 161.96 2024 high and 162 barriers, with a series of higher daily lows supporting the pair ahead of Friday’s Tokyo CPI data. AUD/USD edged up on softer U.S. yields, stronger CNH and firmer commodities, with a supportive daily RSI offset by a sub-moving average position and a weak monthly RSI limiting upside.
Treasury yields eased about 1 basis point, paring a steeper drop after the PCE data, with the 2s/10s curve rising slightly to 26.9bp
The S&P 500 was down 0.03% in choppy trade.
WTI crude oil rose 2.53%.
Gold rose 0.83% while copper was up 2.26%.
Heading toward the close: EUR/USD +0.18%, USD/JPY -0.02%, GBP/USD +0.25%, AUD/USD +0.20%, DXY -0.22%, EUR/JPY +0.14%, GBP/JPY +0.25%, AUD/JPY +0.20%.(Robert Fullem)
