As the North American session begins, the GBP is the strongest and the EUR is the weakest. The USD is mostly higher with declines only vs the GBP but gains are relatively modest with changes vs the JPY, CHF and NZD 0.05% to 0.08% from yesterday’s closing level.

The GBP is stronger despite higher unemployment rate. The unemployment rate rose to 4.4%, the highest level in two and a half years, with the inactivity rate also reaching a nearly decade-high as more than a fifth of working-age people are not actively seeking work. Despite this, wage growth remains strong, with regular earnings rising at an annual pace of 6%.

The Office for National Statistics (ONS) said that “This month’s figures continue to show signs that the labour market may be cooling, with the number of vacancies still falling and unemployment rising, though earnings growth remains relatively strong”

On earnings, regular earnings – which exclude bonuses – rose by 6% YoY, which was unchanged from the previous month.

When the impact of inflation is stripped out, pay increased at an annual pace of 2.9%, the highest since August 2021.

The BOE will meet next week with expectations of no change in rates. The UK election is on July 4 and that increases the chances to sit tight for now.

In the EU as the market adjusts to the implications of the elections, some ECB officials were speaking:

ECB’s Lane: We will be agile on interest rates
ECB’s Lane: We are not pre-committing to a particular rate path
ECB’s Rehn: Monetary policy has dampened price pressures
ECB’s Villeroy: We have leeway to lower rates before exiting restrictive stance

Last week, the ECB cut rates in what was considered a hawkish cut. Yesterday. ECB Pres. Lagarde said that interest rates might not follow a straightforward declining path, suggesting that there could be periods where rates are held steady. She mentioned the possibility that the ECB could maintain rates for longer than a single meeting. Lagarde emphasized the importance of monitoring key indicators such as labor costs and corporate profits. She also noted that providing time-dependent guidance on rates is not helpful, highlighting a more flexible approach to future monetary policy decisions.

The economic calendar in the US is once again light. The NFIB Business optimism index for May has been released already with the index rising to 90.50 from 89.70 last month. The reading represents the highest for the year so far, though it remains below the 50-year average of 98 for the 29th month running. For some context, the last time the reading was at or above the average was all the way back in December 2021. Looking at the details, the uncertainty index rose up to 85 points – its highest since November 2020. It seems like political uncertainty is starting to creep into the picture.

In the US the US treasury will auction off a 10-year notes at 1 PM ET. Yesterday’s three-year note auction was met with tepid demand especially from overseas investors (I gave it an auction grade of a D – not good).

A snapshot of the other markets as the North American session begins shows:

Crude oil is trading down eight cents or -0.10% at $77.66. At this time yesterday, the price was at $76.16.
Gold is trading down $0.36 or -0.02% at $2310.10. At this time yesterday, the price was at $2305.54
Silver is trading down $0.42 or -1.4% at $29.32. At this time yesterday, the price was trading at $29.78
Bitcoin trades lower at $66,981. At this time yesterday, the price was trading up at $69,388
Ethereum is also trading lower at $3535. At this time yesterday, the price was trading at $3670.50

In the premarket, the snapshot of the major indices are trading lower.

Dow Industrial Average futures are implying a decline of -130.10 points. Yesterday, the Dow Industrial Average rose $69.07 or 0.18% at 38868.05
S&P futures are implying a decline of -9.29 points . Yesterday, the S&P index closed at a record level with a gain of 13.80 points or 0.26% at 5360.78.
Nasdaq futures are implying a decline of -37.67 points. Yesterday, NASDAQ index also closed at a record level after a gain of 59.40 points or 0.35% at 17192.83

European stock indices are trading lower today in the US morning snapshot as he continues to adjust to changing political winds:

German DAX, -0.78%
France CAC -1.17%
UK FTSE 100, -0.92%
Spain’s Ibex, -1.76%
Italy’s FTSE MIB, -1.73% (delayed 10 minutes).

Shares in the Asian Pacific markets were mostly lower

Japan’s Nikkei 225, +0.25%
China’s Shanghai Composite Index, -0.76%
Hong Kong’s Hang Seng index, -1.04%
Australia S&P/ASX index, -1.33%

Looking at the US debt market, yields are trading lower ahead of the 10 year note auction at 1 PM ET:

2-year yield 4.840%, -4.5 basis points. At this time yesterday, the yield was at 4.878%
5-year yield 4.435%, -4.8 basis points. At this time yesterday, the yield was at 4.469%
10-year yield 4.429%, -2.9 basis points. At this time yesterday, the yield was at 4.453%
30-year yield 4.568%, -2.7 basis points. At this time yesterday, the yield was at 4.579%

Looking at the treasury yield curve the spreads are moving modestly higher:

The 2-10 year spread is at – 41.0 basis points. At this time Friday, the spread was at -42.5 basis points.
The 2-30 year spread is at – 27.1 basis points. At this time Friday, the spread was at -29.7 basis points.

In the European debt market, yields are mixed