Nvidia up after hours, USD climbs again

• Nvidia stock rallies 4.5% on EPS, sales beat in spite of $4.5bn charge
• Stocks in the red but still up on the week ahead of Nvidia results
• Yen slides again, dollar ticks up as data and Trump help
• FOMC minutes saw rising inflation and jobless risks

FX: USD rose for a second straight day, the first time that has happened in three weeks. Some negativity around the dollar is being revised, especially around the longer-term implications of the end of its reserve currency status. The options markets do point to some easing in deeply bearish sentiment, but skews are still for lower prices. The pivot around 99.57 in the Dollar Index is once again, key. The fed minutes sparked little reaction with inflation risk seen as persistent and officials wanting more clarity on the outlook.

EUR pulled back again on dollar strength. Interestingly, the region’s one-year inflation expectations figure climbed for a second straight month to its highest level since February 2024. This contrasts with the ECB’s current rather dovish outlook, with around 66bps of cuts priced in for 2025. Trade talks with the US are likely to continue right up until the 9 July deadline.

GBP was mid-pack in the major losers, selling off from the fresh Monday three-year high at 1.3592. The dollar rebound is the chief reason, after strong consumer confidence and more optimism around trade deals. The BoE is on hold for its next meeting in June with around 35bps of easing by December.

USD/JPY was bid for a third consecutive session as bond markets continue to worry investors. A weak 40-year Japanese Government Bond auction appears to have weighed on market sentiment. Volatility in bonds contrasts with the relatively hawkish BoJ stance with some focus on its next meeting in mid-June. The 50-day SMA sits at 145.40.

AUD struggled again even after stronger than expected CPI data. NZD outperformedafter ahawkish 25bpa rate cut.Chief economist Conway said they have now entered the neutral zone in a sign that the easing cycle is nearing its end. CAD moved higher though clawed back some losses as the major moved higher for a third day. The Canadian Parliament opening saw the new government’s plan to drive “the largest transformation” of the economy since the end of WWII. There was heavy emphasis on building new trade relationships.

US stocks: US stocks closed in the red. The S&P 500 lost 0.56% to settle at 5,889. The Nasdaq closed down 0.45% at 21,318. The Dow Jones finished lower by 0.58% at 42,099.  Every sector finished in negative territory with a sell-off late in the session. Utilities, materials and energy led the laggards lower. Nvidia released its results after the US close and beat on profit and revenue. That was despite a $4.5bn charge in Q1. The upcoming Q2 revenue outlook fell short but that reflected a $8bn loss in H20 revenue.  Meta is reportedly planning to open physical stores and hire retail workers. Apple is planning a major software rebrand with year-based names; so Apple’s successor to iOS 18 software will be called ‘iOS 26’. The iPhone maker will also launch a dedicated gaming app later this year.

Asian stocks: Futures are mixed. Asian markets traded marginally better after the strong bid Stateside. The Hang Seng and Shanghai Composite rebounded as China industrial profits improved, but lagged on PDD’s post-earnings drop. Xiaomi outperformed on strong Q1 results. The Nikkei 225 gapped higher after yen weakness and the drop in long-bond yields. The ASX 200 was muted on firmer CPI.  

Gold moved lower after it hovered around $3,300. A rebounding dollar has hampered the upside this week.

Day Ahead – Dollar rebound in focus

How long will the dollar bounce last? Are we over the worst and forming a bottom? Certainly, Tuesday’s consumer confidence figures were a boost and notably, were collected after the US-China deal, in contrast to other survey data collated before which were more depressed. News of a possible Japan trade deal before the G7 in mid-June has also helped, though there is growing chatter that Japan may have to agree to limit JPY depreciation versus USD. That wouldn’t be good for the dollar.

This highlights the still deep uncertainty around the current environment. Shorts can be squeezed some more of course but tariffs and the impact on the US economy, concerns about US fiscal policy trends and the administration’s relations with the Fed remain. We probably need a series of stronger than expected US data to see a firm dollar bottom in play. The 50-day SMA has capped the upside for most of this year so far; it sits at 101.11.

Chart of the Day –NZD/USD still rangebound

We got a relatively hawkish RBNZ meeting after the bank cut rates as expected by 25bps to 3.25%. The vote was not unanimous while interest rate forecasts showed an average 2.9% by year-end. That is below the prior update of 3.1% but not lower to 2.75%. Governor Hawkesby sounded quite cautious on more policy easing saying, “we have done a lot of work” and Chief Economist Conway said rates are now close to neutral. Data dependent seems the way forward for the central bank. Resistance is strong around 0.6028/30 with support between the 200-day SMA at 0.5877 and the 50-day SMA at 0.5859.

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