USD: Still waiting on the data catalyst – Commerzbank

US data sent very mixed messages yesterday to a market seeking validation of recent dovish Fed speculation. 1Q GDP was revised again, showing an even bigger quarter-on-quarter annualised contraction of -0.5% compared to the previously reported -0.2%. Personal consumption was revised lower from 1.2% to 0.5% QoQ, and the core PCE rose slightly from 3.4% to 3.5%. Other negative news came from the trade deficit, which widened more than expected to $96.6bn, versus forecasts of $86.1bn. This should be a drag on 2Q GDP, ING's FX analyst Francesco Pesole notes.

Balance of risks for the dollar remains tilted to the downside

"Jobless claims were mixed, with initial claims falling and continuing claims rising. On the positive side, durable goods orders spiked 16% month-on-month in May, almost entirely thanks to a surge in non-defence aircraft orders. Stripping out aircraft, non-defence capital goods orders rose a respectable 1.7% after last month’s 1.4% drop, leaving the underlying trend flat. That probably helped shield the dollar from other soft data. All in all, nothing in the US calendar screamed in favour of another leg lower in short-term USD swap rates."

"Today, the highlight in data is the Fed’s preferred inflation measure, the core PCE, for the month of May. That’s expected at 0.1% month-on-month, the same as in April. Any print below that should hit the dollar, even though at this stage we think it is employment data that could have a bigger impact. Personal spending figures for May are also published today. Fedspeak also remains highly relevant. Yesterday, Mary Daly, Susan Collins and Michael Barr sided with Chair Jay Powell’s cautious rhetoric, following reports that Trump could pick a new Chair early. The White House said the decision is not 'imminent', but the dollar’s extreme sensitivity to the Fed independence theme means unconfirmed media reports are enough to trigger a selloff. Today, we’ll hear from Neel Kashkari, John Williams and Beth Hammack."

"The balance of risks for the dollar remains tilted to the downside, with multiple factors – Fed, data, spending bill, tariffs – all carrying the potential to trigger another downward adjustment in the dollar. Until next week’s data offers some clarity on the actual plausibility of a July cut, markets may retain a bias to receive front-end USD rates and fade dollar rallies."