On May 29th, Chicago Fed President Austan Goolsbee intensified his warnings, noting that rising expectations for AI's potential to boost productivity could fuel inflation and potentially force the Federal Reserve and other central banks to raise interest rates. In prepared remarks for a Bank of Japan conference, Goolsbee stated, "The more hype there is about future productivity, the more likely it is that interest rates will need to rise to prevent the economy from overheating." He added, "And, more importantly, near-term supply shocks—whether from oil prices, supply chain disruptions, or other factors—could exacerbate the problem." Goolsbee suggested that if productivity gains are widely anticipated, the scenario differs. Such expectations could trigger a preemptive surge in consumption, driving up prices before actual productivity improvements materialize. "In that case, interest rates may need to increase," Goolsbee said. "This could also affect other countries, as productivity gains or anticipated gains spread across borders with new technologies."
Separately, U.S. initial jobless claims edged slightly higher but remained at levels consistent with a stable labor market. Data released by the U.S. Labor Department on Thursday showed that for the week ending May 23rd, initial claims rose by 5,000 to 215,000, exceeding market expectations and reaching the highest level since mid-April. Continuing claims increased to 1.786 million the previous week, also above forecasts. Despite the recent uptick, both metrics remain near historical lows. Although several prominent companies have announced multiple rounds of layoffs, particularly in white-collar sectors like technology, jobless claims in the U.S. have stayed subdued this year. Analysis points out that initial claims have consistently remained below year-ago levels. So far, expectations regarding AI-driven automation and heightened geopolitical uncertainty have not substantially impacted weekly jobless claims figures.
Key data to watch today includes Germany's seasonally adjusted unemployment rate for May, Germany's preliminary CPI annual rate for May, Canada's annualized quarterly GDP growth rate for Q1, Canada's seasonally adjusted monthly GDP for March, and the U.S. Chicago PMI for May.
**Gold/USD** Gold moved higher in a choppy session yesterday, closing with modest gains. The pair is currently trading around $4504. Besides short-covering providing some support, optimism about a potential Middle East deal, which reduced safe-haven demand for the U.S. dollar, was also a significant factor underpinning gold's rebound. Additionally, weaker-than-expected U.S. economic data released during the session offered further support. However, expectations for further Federal Reserve rate hikes limited gold's upside. Today, resistance is noted near $4550, with support around $4450.
**USD/JPY** The USD/JPY pair edged lower in a volatile session yesterday, closing slightly down. It is currently trading around 159.30. Apart from profit-taking exerting some downward pressure, a softer U.S. dollar index—weighed down by reduced safe-haven appeal and disappointing economic data—also contributed to the pair's decline. Furthermore, concerns about potential renewed Japanese FX intervention and expectations for a future Bank of Japan rate hike added to the selling pressure. Resistance is seen near 160.00 today, with support around 158.50.
**USD/CAD** The USD/CAD pair declined yesterday, breaching the 1.3800 level, and is currently trading near 1.3790. In addition to profit-taking, a weaker U.S. dollar index—pressured by soft economic data and diminished safe-haven demand—was a key factor driving the pair lower. However, falling crude oil prices helped limit the pair's losses. Resistance is anticipated near 1.3900 today, while support lies around 1.3700.
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