From Marc to Market:
Overview: The combination of President Trump's renewed threat to send letters to announce the new bilateral tariff letters and the heightened tensions with Iran have spurred risk-off forces but they have not been expressed, as often is the case, with a stronger dollar and a surge in gold. The greenback is softer against nearly all the G10 currencies and most emerging markets currencies, though not the Mexican peso, which rose to its best level since last August yesterday. Outside of the sterling, whose upside has been limited by the larger than expected economic contraction in April and the dollar-bloc currencies, the other G10 currencies are up at least 0.50% ahead of the North American open. Demand for South Korean stocks, which extended their rally for the seventh consecutive session, has lifted the won by more than 1% to lead most market currencies higher. For its part, gold has edged higher, and while it recorded a new high for the week (almost $3378), it has pulled back toward $3339 by the European open before finding new demand. It is trading near $3360-2.
Equities, outside of the continued rally in South Korea, are mostly lower today. In the Asia Pacific region, Hong Kong and mainland shares that trade there, led the losses with more than a 1% decline. Europe's Stoxx 600 is weaker for the fourth consecutive session, and US index futures are 0.3%-0.5% lower. Bonds are bid. European yields are off mostly 4-6 bp and the 10-year US Treasury yield is off nearly four basis points to around 4.38%. The US sells $22 bln 30-year bonds today amid some trepidation. It is currently yielding about 4.88%, a four-day low. May WTI spiked to a two-month high near $69.30 but has reversed lower and fell to almost $67.00 in Europe to approach the 200-day moving average.
USD: The softer than expected CPI weighed on the dollar, but at the close yesterday, the Fed funds futures market was still not fully discounting two rate cuts this year. However....
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