Markets Report - 05 June 2023

A daily breakdown of the markets for the 5th June 2023, provided to you by Sterlex.

🇪🇺💶EUR/USD slips back below the 1.0700 level and prints new 2-day lows near 1.0680 on Monday. In the domestic calendar, final Services PMI in Germany and the euro area came in at 57.2 and 55.1, respectively, for the month of May. Still in the region, ECB President C Lagarde is expected to speak before the European Parliament later in the afternoon. In addition, Germany’s trade surplus rose to €18.4B in April. Moving forward, hawkish ECB speak continues to favour further rate hikes, although this view appears to be in contrast to some loss of momentum in economic fundamentals in the region.

Key events in the euro area this week: Germany Final Services PMI/Balance of Trade, EMU Final Services PMI/Sentix Index/Producer Prices (Monday) – Germany Construction PMI/Factory Orders, EMU Retail Sales (Tuesday) – Germany Industrial Production (Wednesday) - EMU Flash GDP Growth Rate (Thursday).

🇬🇧💷Firming expectations for additional interest rate hikes by the Bank of England (BoE), bolstered by stronger-than-expected UK consumer inflation figures for May, might contribute to limiting losses for the GBP/USD pair. Market participants now look forward to the release of the final UK Services PMI for a fresh impetus ahead of the US ISM Services PMI, due later during the early North American session.

🇺🇸 🏦The US Dollar holds its ground against its major rivals at the beginning of the new week with the US Dollar Index (DXY) building on Friday's gains. Early Monday, the index continues to stretch higher and stays in positive territory above 104.00. Further details of the publication revealed that the Unemployment Rate edged higher to 3.7% from 3.4% in April. The DXY regained its traction on the strong NFP reading and retraced a portion of its weekly decline. On Friday, the US Bureau of Labor Statistics reported that Nonfarm Payrolls (NFP) in the US rose 339,000 in May, surpassing the market expectation of 190,000 by a wide margin. In the meantime, the benchmark 10-year US Treasury bond yield is already up more than 1% on the day above 3.7%. Nevertheless, the CME Group FedWatch Tool shows that markets are still pricing in a more than 70% possibility that the Fed will leave its policy rate unchanged at the upcoming meeting. Nevertheless, US stock index futures trade mixed, reflecting a cautious stance.