Outlook: Today is as slow a data day as it gets-- weekly MBA mortgage applications, April final wholesale inventories, and the Energy Dept oil inventories.  Watch for made-up outrages. The Atlanta Fed GDPNow was a disappointing 0.9% for Q2, down from 1.3% on June 1, again on worsening in consumer spending and private investment. This points to recession, while the financial press has turned a corner to stagflation, according to a WSJ headline. This is probably because TreasSec Yellen admitted (again) she missed the rise in inflation and yes, it can persist for longer than we think. The US will be raising its forecast from 4.7% to something higher now we have seen the whites of 8% eyes. Meanwhile, as noted above, the World Bank is still focused on recession. The World Bank predicts global growth to slump to 2.9% in 2022 from 5.7% in 2021, significantly lower than 4.1% in Jan. The US will slow to 2.5% in 2022, down by 1.2% from the earlier forecast. “New U.S. inflation data, to be released Friday, is expected by economists to show the annual rate holding steady at 8.3% in May, near a 40-year high.” The other data of note yesterday was consumer credit, touted by some at catastrophically high levels. One reports says it’s up 20%, showing consumers use cards to support current consumption. But it’s not so. The revolving credit balance is a mere $1.04 trillion in April, up 2.6% from April 2019. You have to cut out non-revolving and also beware annualizing a single month. Year-over-year is far better and year-over-pandemic year is better yet. When you see wildly bigger numbers, consider the exact nature of the liability being named. Revolving credit (ex-mortgages) is credit cards and personal loans, and as Wolf Street points out, “Since 2019, consumer spending has increased 19%, and revolving credit has increased only 2.9%, both not adjusted for 13% inflation over the period. In other words, growth in revolving credit fell sharply behind inflation and fell massively behind growth in consumer spending. This shows that consumers are relying less on revolving credit. “Credit cards and some types of personal loans, such as payday loans, are the most expensive form of credit, and they often come with usurious interest rates. Credit card rates can exceed 30%. And Americans have figured this out. If they need to fund purchases, many consumers use cheaper loans, including cash-out refinancing of their mortgages. And many, many consumers are using their credit cards just as payment methods, and they pay them off every month. That’s what these relatively low balances show.” Wolf also complains about seasonal adjustments to the series and while he’s right, it’s not the main event, which is that the US consumer may be greedy, but he’s not stupid, and we are not seeing a drunken sailor spending spree as some versions of the data seem to show. Here we have a case of two semi-maverick analysts, both of them deeply skeptical of the government and all its data and minions, but with great charting capability and this time, divergent views. On the whole, Wolf is less politically biased and we say that helps. Next up is the ECB policy meeting and perhaps a crisis in the UK, where Boris wants to fiddle the N. Ireland protocol and kick out the European Court. He might get away with it and it’s not a death knell to his political career as some hope, but it’s probably very, very bad for the UK economy, depending on what retaliation the Europeans come up with. At a guess, the euro’s resilience in the face of a dollar semi-rally yesterday will spill over to strength against the pound today and going forward. We see doom for sterling. This is an excerpt from “The Rockefeller Morning Briefing,” which is far larger (about 10 pages). The Briefing has been published every day for over 25 years and represents experienced analysis and insight. The report offers deep background and is not intended to guide FX trading. Rockefeller produces other reports (in spot and futures) for trading purposes. To get a two-week trial of the full reports plus traders advice for only $3.95. Click here!

EUR/USD - 1.0696 Euro's selloff from last Mon's 1-month peak at 1.0786 to as low as 1.0628 (Wed) suggests upmove from May's fresh 5-year bottom at 1.0350 has made a top there and despite strong rebound to 1.0764 Fri, subsequent retreat to 1.0653 in New York Tue and then rebound would yield range trading before prospect of another fall, below 1.0653 would yield 1.0628. On the upside, only a daily close above 1.0751 would risk stronger gain towards 1.0764 but 1.0786 should hold initially. Data to be released on Wednesday Japan current account, trade balance, GDP, eco watchers current, eco watchers outlook. Swiss unemployment rate, U.K. Halifax house prices, S&P construction PMI, Germany industrial output, France trade balance, imports, exports, Italy retail sales, EU employment, GDU. U.S. MBA mortgage application, wholesale inventories and wholesale sales.

Fresh Chinese covid waves and BOJ reluctance to ease may put the yen on top in June. Uncertainty about eurozone inflation and the ECB's moves could keep the euro bid. Clear indications of peak US inflation could send the dollar tumbling down.  How will the dollar, euro and yen play out in June? The month when spring makes way to summer in the northern hemisphere is busy with critical central bank decisions and the US Federal Reserve and the European Central Bank. The yen depends less on the Bank of Japan and more on China.  *Note: This content first appeared as an answer to a Premium user. Sign up and get unfettered access to our analysts and exclusive content. 1) The Japanese yen has two reasons to rise The yen may receive a boost from a fresh outbreak of covid in China, which would trigger lockdowns and a rush to the regional safe haven – the yen. Authorities in Beijing continue prioritizing their zealous zero covid policy in curbing the disease, instead of opting to vaccinate the elderly with Western mRNA vaccines.  The recent lifting of restrictions from Shanghai's factories and Beijing's closed districts came after the world's second-largest economy crushed covid, but at a high cost to its economy and the global one. For President Xi Jinping, this was a vindication of his policies.  Another reason to favor the yen is that the Bank of Japan may struggle to maintain its policy of holding 10-year Japanese bond yields to a maximum of 0.25%. With rising prices reaching the shores of Japan, the BOJ may opt to print fewer yen and let the currency rise. 2) Euro boom of sorts Inflation is rising in the eurozone and consumers seem less worried about Russia's war in Ukraine. Europeans are leaping on flights and vacations despite higher costs, boosting even core prices higher and forcing the European Central Bank to act. While ECB President Christine Lagarde signaled a rate hike would only come in July, she could be forced to raise borrowing costs already in June. Even if that does not happen, the ECB publishes new forecasts, and they will likely show robust inflation and not-too-depressing growth forecasts. Instead of acting early, the Frankfurt-based institution could indicate July's rate hike would be a double-dose 50 bps one – bringing borrowing costs back to zero. Any hawkishness from the usually wary ECB would send the euro higher. 3) Dollar climbing down the mountain Why would the world's reserve currency lag while the Fed is pursuing aggressive monetary policy? The US is ahead of the world in its economic cycle, and recent indicators have shown that higher prices are already causing some demand destruction. Sales of homes are falling and yearly inflation seems to have peaked.  While the road back to normal inflation is still long, my bet is that June would be the month in which America sees peak inflation in the rear-view mirror. If the Fed gives the notion that the worst is already behind us, the dollar could begin a more substantial descent. Such a decline would still be gradual, but with fewer countertrends.  Apart from the Fed decision, inflation figures and home sales are also crucial in defining the dollar's direction.  Conclusion Action in financial markets never takes a summer vacation – but just before it becomes too hot, investors tend to act. June is set to be a month of substantial volatility and also long-term changes for currencies. 

Fresh Chinese covid waves and BOJ reluctance to ease may put the yen on top in June. Uncertainty about eurozone inflation and the ECB's moves could keep the euro bid. Clear indications of peak US inflation could send the dollar tumbling down.  How will the dollar, euro and yen play out in June? The month when spring makes way to summer in the northern hemisphere is busy with critical central bank decisions and the US Federal Reserve and the European Central Bank. The yen depends less on the Bank of Japan and more on China.  *Note: This content first appeared as an answer to a Premium user. Sign up and get unfettered access to our analysts and exclusive content. 1) The Japanese yen has two reasons to rise The yen may receive a boost from a fresh outbreak of covid in China, which would trigger lockdowns and a rush to the regional safe haven – the yen. Authorities in Beijing continue prioritizing their zealous zero covid policy in curbing the disease, instead of opting to vaccinate the elderly with Western mRNA vaccines.  The recent lifting of restrictions from Shanghai's factories and Beijing's closed districts came after the world's second-largest economy crushed covid, but at a high cost to its economy and the global one. For President Xi Jinping, this was a vindication of his policies.  Another reason to favor the yen is that the Bank of Japan may struggle to maintain its policy of holding 10-year Japanese bond yields to a maximum of 0.25%. With rising prices reaching the shores of Japan, the BOJ may opt to print fewer yen and let the currency rise. 2) Euro boom of sorts Inflation is rising in the eurozone and consumers seem less worried about Russia's war in Ukraine. Europeans are leaping on flights and vacations despite higher costs, boosting even core prices higher and forcing the European Central Bank to act. While ECB President Christine Lagarde signaled a rate hike would only come in July, she could be forced to raise borrowing costs already in June. Even if that does not happen, the ECB publishes new forecasts, and they will likely show robust inflation and not-too-depressing growth forecasts. Instead of acting early, the Frankfurt-based institution could indicate July's rate hike would be a double-dose 50 bps one – bringing borrowing costs back to zero. Any hawkishness from the usually wary ECB would send the euro higher. 3) Dollar climbing down the mountain Why would the world's reserve currency lag while the Fed is pursuing aggressive monetary policy? The US is ahead of the world in its economic cycle, and recent indicators have shown that higher prices are already causing some demand destruction. Sales of homes are falling and yearly inflation seems to have peaked.  While the road back to normal inflation is still long, my bet is that June would be the month in which America sees peak inflation in the rear-view mirror. If the Fed gives the notion that the worst is already behind us, the dollar could begin a more substantial descent. Such a decline would still be gradual, but with fewer countertrends.  Apart from the Fed decision, inflation figures and home sales are also crucial in defining the dollar's direction.  Conclusion Action in financial markets never takes a summer vacation – but just before it becomes too hot, investors tend to act. June is set to be a month of substantial volatility and also long-term changes for currencies. 

Fresh Chinese covid waves and BOJ reluctance to ease may put the yen on top in June. Uncertainty about eurozone inflation and the ECB's moves could keep the euro bid. Clear indications of peak US inflation could send the dollar tumbling down.  How will the dollar, euro and yen play out in June? The month when spring makes way to summer in the northern hemisphere is busy with critical central bank decisions and the US Federal Reserve and the European Central Bank. The yen depends less on the Bank of Japan and more on China.  *Note: This content first appeared as an answer to a Premium user. Sign up and get unfettered access to our analysts and exclusive content. 1) The Japanese yen has two reasons to rise The yen may receive a boost from a fresh outbreak of covid in China, which would trigger lockdowns and a rush to the regional safe haven – the yen. Authorities in Beijing continue prioritizing their zealous zero covid policy in curbing the disease, instead of opting to vaccinate the elderly with Western mRNA vaccines.  The recent lifting of restrictions from Shanghai's factories and Beijing's closed districts came after the world's second-largest economy crushed covid, but at a high cost to its economy and the global one. For President Xi Jinping, this was a vindication of his policies.  Another reason to favor the yen is that the Bank of Japan may struggle to maintain its policy of holding 10-year Japanese bond yields to a maximum of 0.25%. With rising prices reaching the shores of Japan, the BOJ may opt to print fewer yen and let the currency rise. 2) Euro boom of sorts Inflation is rising in the eurozone and consumers seem less worried about Russia's war in Ukraine. Europeans are leaping on flights and vacations despite higher costs, boosting even core prices higher and forcing the European Central Bank to act. While ECB President Christine Lagarde signaled a rate hike would only come in July, she could be forced to raise borrowing costs already in June. Even if that does not happen, the ECB publishes new forecasts, and they will likely show robust inflation and not-too-depressing growth forecasts. Instead of acting early, the Frankfurt-based institution could indicate July's rate hike would be a double-dose 50 bps one – bringing borrowing costs back to zero. Any hawkishness from the usually wary ECB would send the euro higher. 3) Dollar climbing down the mountain Why would the world's reserve currency lag while the Fed is pursuing aggressive monetary policy? The US is ahead of the world in its economic cycle, and recent indicators have shown that higher prices are already causing some demand destruction. Sales of homes are falling and yearly inflation seems to have peaked.  While the road back to normal inflation is still long, my bet is that June would be the month in which America sees peak inflation in the rear-view mirror. If the Fed gives the notion that the worst is already behind us, the dollar could begin a more substantial descent. Such a decline would still be gradual, but with fewer countertrends.  Apart from the Fed decision, inflation figures and home sales are also crucial in defining the dollar's direction.  Conclusion Action in financial markets never takes a summer vacation – but just before it becomes too hot, investors tend to act. June is set to be a month of substantial volatility and also long-term changes for currencies. 

Fresh Chinese covid waves and BOJ reluctance to ease may put the yen on top in June. Uncertainty about eurozone inflation and the ECB's moves could keep the euro bid. Clear indications of peak US inflation could send the dollar tumbling down.  How will the dollar, euro and yen play out in June? The month when spring makes way to summer in the northern hemisphere is busy with critical central bank decisions and the US Federal Reserve and the European Central Bank. The yen depends less on the Bank of Japan and more on China.  *Note: This content first appeared as an answer to a Premium user. Sign up and get unfettered access to our analysts and exclusive content. 1) The Japanese yen has two reasons to rise The yen may receive a boost from a fresh outbreak of covid in China, which would trigger lockdowns and a rush to the regional safe haven – the yen. Authorities in Beijing continue prioritizing their zealous zero covid policy in curbing the disease, instead of opting to vaccinate the elderly with Western mRNA vaccines.  The recent lifting of restrictions from Shanghai's factories and Beijing's closed districts came after the world's second-largest economy crushed covid, but at a high cost to its economy and the global one. For President Xi Jinping, this was a vindication of his policies.  Another reason to favor the yen is that the Bank of Japan may struggle to maintain its policy of holding 10-year Japanese bond yields to a maximum of 0.25%. With rising prices reaching the shores of Japan, the BOJ may opt to print fewer yen and let the currency rise. 2) Euro boom of sorts Inflation is rising in the eurozone and consumers seem less worried about Russia's war in Ukraine. Europeans are leaping on flights and vacations despite higher costs, boosting even core prices higher and forcing the European Central Bank to act. While ECB President Christine Lagarde signaled a rate hike would only come in July, she could be forced to raise borrowing costs already in June. Even if that does not happen, the ECB publishes new forecasts, and they will likely show robust inflation and not-too-depressing growth forecasts. Instead of acting early, the Frankfurt-based institution could indicate July's rate hike would be a double-dose 50 bps one – bringing borrowing costs back to zero. Any hawkishness from the usually wary ECB would send the euro higher. 3) Dollar climbing down the mountain Why would the world's reserve currency lag while the Fed is pursuing aggressive monetary policy? The US is ahead of the world in its economic cycle, and recent indicators have shown that higher prices are already causing some demand destruction. Sales of homes are falling and yearly inflation seems to have peaked.  While the road back to normal inflation is still long, my bet is that June would be the month in which America sees peak inflation in the rear-view mirror. If the Fed gives the notion that the worst is already behind us, the dollar could begin a more substantial descent. Such a decline would still be gradual, but with fewer countertrends.  Apart from the Fed decision, inflation figures and home sales are also crucial in defining the dollar's direction.  Conclusion Action in financial markets never takes a summer vacation – but just before it becomes too hot, investors tend to act. June is set to be a month of substantial volatility and also long-term changes for currencies.