Computer glitch – Brief commentary

Japan: USD reached nearly JPY159.15, highest since late April.  US Treasury added Japan to fx watchlist after recent intervention. USD up past six consecutive sessions coming into today. Japanese rhetoric about fx escalates.  National CPI headline and core ticked up primarily utilities (electricity and gas). Excluding food and energy, CPI slowed to 2.1% from 2.4%. This was largely in line with the Tokyo CPI released a few weeks ago. The flash PMI softened with the composite at 50.0 vs. 52.6.  

China: The PBOC fixed the dollar at CNY7.1196, a new high for the year.  Banks were selling dollars. The offshore yuan reached CNH7.2925, a new high for the year. Loan prime rates were left unchanged. 

Australia: The PMI slowed, and the composite stands at 50.6 from 52.1. New orders and prices eased. The Australian dollar reached $0.6670 yesterday and could not extend its gains today. It is hovering in the middle of its $0.6600-$0.6700 range.  

EMU: The weak PMI saw the euro slump to test last week’s low near $1.0670. The German and French PMI weakened, and the aggregate composite fell to 50.8 from 52.2. It ends Q2 on a weak note. Resistance now $1.0700-20. European bond yields are 4-6 bp lower. The German-French 10-year spread is near 78 bp, up 1-2 bp on the week.  

UK: The UK reported better than expected retail sales (2.9% vs. 1.8% expected after April’s decline was revised to -1.8% from -2.3%. The manufacturing PMI unexpected ticked higher (51.4 vs. 51.2), but the weakness in services (51.2 vs. 52.9) was also a surprise. The composite fell to 51.7 from 53.0. Sterling was sold to about $1.2635 today, the lowest level since May 15. Resistance is now seen around $1.2680.  

Canada: Canada reports April retail sales. It is expected top rise 0.7% after a 0.2% decline in March. The US dollar slipped to a two-week low near CAD1.3675 and approached support near CAD1.3660. It enters today with a five-day decline in tow. The Bank of Canada is seen as one of the most dovish central banks in the G10. Note that Canada is preparing to levy new tariffs on China-produced EVs.  

Mexico: Mexico reported stronger than expected April retail sales yesterday (+0.5% vs. -0.2% forecast) but the peso’s recovery seemed more a response to the cabinet appointments that President Sheinbaum announced. They were seen as moderates within the Morena party, including Ebrard, the former mayor of Mexico whom Sheinbaum defeated for the nomination. Implied one-month vol has eased from over 19% to around 14%. The dollar is finding support near MXN18.30. Nearby support is seen near MXN18.20 and then MXN17.95-MXN18.00. 

US: The US sees the flash PMI (expected to slow a little, with the composite easing to 53.5 from 54.5). The index of leading economic indicators is seen extending its decline and existing home sales are expected to have fallen by 1.0% after a nearly 2% decline in April.  No Fed officials are scheduled to speak today. The market has about 47 bp of cuts priced in this year, which is a couple less than a week ago. Note that options tied to indices, stocks, ETFs roll off and futures expire today.