US initial jobless claims came in at 236,000, below the estimated 245,000. The US May trade balance showed a deficit of $96.59 billion, higher than the expected $88.50 billion. The US’s first quarter GDP was revised to -0.5%, compared to an expected -0.2%. May durable goods orders increased by 16.4%, far exceeding the expected 8.5%. Advance wholesale inventories in May decreased by 0.3%, against a predicted 0.1% increase.

Central Bank Actions

The Mexican central bank reduced its benchmark rate by 50 basis points. The Fed is not likely to cut rates in July, according to officials. The US sold 7-year notes at 4.022%, slightly lower than the 4.024% expected. Pending home sales in the US rose by 1.8%, beating the forecast of 0.1%. Canada’s average weekly earnings for April rose by 4.43%, slightly up from last month. The S&P 500 increased by 49 points, WTI crude oil rose by 44 cents, and US 10-year yields fell by 4.2 basis points. Gold decreased by $1, while the Swiss franc strengthened, and the US dollar weakened. The euro, pound, and Swiss franc reached multi-year highs amidst a weaker US dollar. USD/JPY and USD/CAD experienced declines due to economic conditions and adjustments in trade.

Equities and Commodities

The figures show a mixed picture of the US economy. On the one hand, jobless claims remain relatively low, indicating that the labour market, at least for now, retains some resilience. At the same time, the trade deficit came in wider than expected, pointing to imbalances that may weigh on growth. That’s especially material when contrasted with the first quarter GDP revision, which moved downward further into contraction. A negative revision like this suggests that initial optimism around early-year growth was misplaced. When we looked at May’s durable goods orders, the outsized gain was difficult to ignore. The 16.4% print more than doubled the forecast and suggests pockets of demand strength, potentially fuelled by government procurement or transportation orders rather than broad-based business investment. However, wholesale inventories declined, not in line with expectations, which hints at caution in restocking and underscores some anxieties in the supply chain or from demand expectations. One of the more telling policy signals came from south of the border, where the central bank surprised markets with a larger-than-expected rate cut. This move suggests that some economies are shifting toward preemptive easing to shield against softer growth in major export markets. In contrast, US officials have made it clear July is not on the table for cuts, which leaves traders needing to position around less dovish monetary expectations – a factor that plays directly into near-term Treasury pricing and volatility premiums. As for fixed income, the 7-year note auction came through just a touch softer than anticipated, yet demand seems to remain stable. This suggests that even in the absence of imminent Fed action, there’s still ample interest in US duration, likely due to market participants bracing for a slower pace of inflation recovery than previously expected. On the housing front, pending sales numbers surprised firmly to the upside. The property sector often lags behind interest rate movements, and this pick-up may reflect pent-up demand finally working through pipeline delays. If anything, it’s a sign that, in spite of higher borrowing costs, certain sectors haven’t cooled as thoroughly as anticipated. Cross-border momentum added another layer. The Canadian earnings figure, up slightly, might help keep the Bank of Canada steady for now – though weaker US data could complicate that stance over the next quarter. In FX, the US dollar gave back value broadly, encouraging strength in Europe’s major currencies. Movements in USD/JPY and USD/CAD traced directly back to rate expectations and softening US data, amplifying the rotation into currencies that now appear more rate-stable or supported by firmer domestic data. Equities climbed firmly, perhaps more a reflection of expectations around longer-term Fed policy relief than hard short-term data. Meanwhile, declines in gold, modest as they were, underline lower demand for safe havens, at least this week. Oil’s modest rise did little to shift inflation expectations, while the drop in 10-year yields reinforced that front-end rate stability is still being priced into the back-end of the curve. Right now, conditions imply a narrower probability band for large moves in short-term interest rates, though back-end vol remains in play. With spreads tightening across US peers, carry strategies have become marginally less attractive, requiring more selective exposure and attention to yield shifts post-data.

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