With a lack of major economic indicators scheduled for today, market focus is shifting towards reports and statements from central bankers and financial authorities. The Eurozone Consumer Confidence Index (preliminary) for May is the only notable economic release on the calendar. The start of the week tends to have fewer economic statistics released for the US and Canada, and today is a holiday in Canada for Victoria Day, resulting in thin trading expected during the latter half of the New York session.
Market sentiment remains sensitive to news related to the US debt ceiling, so continued caution is necessary. US Treasury Secretary Janet Yellen has repeatedly emphasized June 1st as an important date (referred to as “X-Day”). Political negotiations between the Democratic administration and the Republican Congress continue, leading to both optimistic and pessimistic perspectives. Until decisions are announced, the market is expected to remain relatively stagnant. President Biden, House Speaker McCarthy, and other officials have scheduled a meeting to discuss the US debt ceiling issue.
Furthermore, there are several scheduled speeches from financial authorities in the US and Europe today. From the ECB, speakers include Boris Vujčić, the Governor of the Croatian National Bank, Isabel Schnabel, the ECB Vice President, Robert Holzmann, the Governor of the Austrian National Bank, Philip R. Lane, the ECB Chief Economist, François Villeroy de Galhau, the Governor of the Bank of France, and Pablo Hernández de Cos, the Governor of the Bank of Spain. From the Federal Reserve, speakers include Mary C. Daly, the President of the Federal Reserve Bank of San Francisco, Raphael Bostic, the President of the Federal Reserve Bank of Atlanta, and Thomas Barkin, the President of the Federal Reserve Bank of Richmond.
At the end of last week, Federal Reserve Chair Jerome Powell and Minneapolis Federal Reserve Bank President Neel Kashkari, known for their hawkish stance, indicated the possibility of supporting a steady interest rate at the June FOMC meeting. Currently, more than 90% of short-term financial markets have priced in a steady interest rate. On the other hand, ECB officials have repeatedly mentioned the stickiness of inflation and the need for additional rate hikes. However, the EUR/USD exchange rate has been in a downtrend since May. While US interest rate expectations remain fluid, expectations for additional rate hikes by the ECB appear to have already been priced in.
Despite the absence of major economic indicators, the Nikkei 225 index continues its upward trend. Considering the strong correlation with stock prices, the Oceania currencies have been chosen, with AUD/JPY being particularly favorable from a technical standpoint. Hence, an entry has been made into this currency pair.