The President of the San Francisco Federal Reserve, Mary Daly, stated on Thursday that current U.S. monetary policy is in a "good place." However, due to the significant uncertainty surrounding the economic outlook, the Federal Reserve will not provide clear forward guidance on the future interest rate path for the time being and will adjust policies flexibly based on evolving economic data. Daly indicated that the Fed is prepared to respond to various economic scenarios and will take appropriate measures regardless of how the economic situation unfolds. "We are prepared to respond as the economy evolves," Daly said. "Providing more forward guidance on the future path of rates now could ultimately be misleading because we have to wait for further data to come in." The market widely expects the Fed to keep interest rates unchanged at its policy meeting scheduled for June 16-17.
Additionally, data released by the National Federation of Independent Business showed that in May, the proportion of U.S. small businesses planning to hire new employees or reporting difficulties in filling job vacancies fell to its lowest level in six years. The NFIB stated on Thursday that, after seasonal adjustment, the share of small business owners planning to create new jobs in the next three months was 9%, down 4 percentage points from April. Meanwhile, the share of those reporting hard-to-fill job openings fell 5 percentage points to 29%. Both indicators hit their lowest levels since May 2020. The NFIB's data suggests that rising energy costs and economic uncertainty, against the backdrop of the ongoing Middle East conflict, may be dampening small businesses' expansion plans. The NFIB noted that while the share of small business owners citing "quality of labor" as their top problem declined in May, the proportion listing "labor costs" as their primary concern rose to a record high for the survey. However, the share of businesses that have raised or plan to raise compensation remained largely stable.
Key data to watch today include the Eurozone's final Q1 seasonally adjusted GDP quarter-on-quarter rate, U.S. May non-farm payrolls change (seasonally adjusted), Canada's May employment change, and Canada's May Ivey Purchasing Managers' Index (seasonally adjusted).
Dollar Index
The U.S. dollar index trended lower yesterday, closing slightly down for the day, and is currently trading around 99.40. Profit-taking exerted some downward pressure on the index, while the primary factor for its decline was a reduction in safe-haven demand for the dollar as market risk sentiment improved following a ceasefire agreement in the Middle East. However, expectations for Federal Reserve interest rate hikes limited the extent of the index's pullback. Today, resistance near 99.80 is in focus, with support around 99.00.
Euro / U.S. Dollar
The euro moved higher yesterday, closing with modest gains, and is currently trading around 1.1610. Short covering and technical buying interest near the 1.1600 level provided some support. Additionally, a softer U.S. dollar index, pressured by cooling safe-haven demand, was a key factor underpinning the euro's rebound. Expectations for interest rate hikes by the European Central Bank also lent some support to the pair. Today, resistance near 1.1700 is in focus, with support around 1.1500.
British Pound / U.S. Dollar
The British pound edged higher yesterday, closing slightly up, and is currently trading around 1.3420. Short covering provided some support, while the main driver for the pound's recovery was a weaker U.S. dollar, which softened due to reduced safe-haven demand following the Middle East ceasefire agreement. However, tempered expectations for Bank of England rate hikes and persistent expectations for Federal Reserve tightening limited the pair's upward momentum. Today, resistance near 1.3500 is in focus, with support around 1.3350.
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