PCE Cools the Inflation Narrative
PCE core inflation rose 3.4% in May, as expected. The headline number at 3.9% also matched estimates. The numbers come after CPI data hit 5% in a big surprise. The market eventually digested (and shrugged off) the high CPI reading but there's a limit to how many inflation surprises the Fed will tolerate.
The dollar sold off on the headlines but hours later it recovered, in part to a climb in Treasury yields. The bond market continues to be a key barometer. It's the single-most sensitive asset class to inflation and the Fed. With 10s at 1.52% the message about transitory inflation is clear but it will be tested repeatedly in the months ahead and a major repricing would have enormous implications for virtually every global asset class.
The new week starts with a strong rally in crypto, led by a 10% weekend jump in ethereum. The resolve of the bulls this month despite a battering has been impressive.
CFTC Commitments of Traders
Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.
EUR +89K vs +118K prior
GBP +18K vs +32K prior
JPY -53K vs -47K prior
CHF +14K vs +9K prior
CAD +43K vs +44K prior
AUD -17K vs -18K prior
NZD +3K vs +3K prior
This is the first look we have at post-Fed positioning and it highlights the likelihood that late-coming longs in EUR and GBP were squeezed out on the big USD rally after the FOMC.
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