The Fed finally ditched their long-standing "patient" stance yesterday. US equity futures sharply rose along with the Treasuries as the Fed’s dovish shift reverberated through markets this morning. Many market participants viewed their tone as more dovish-than-expected after the Fed signaled that the interest rate cuts could come as early as next month. 7 of 17 Fed officials slashed their rate outlook by a half percentage point by the end of the year. Fed Chair Powell added that uncertainties over intensifying trade tensions and growing concerns about inflation had been building the case for a rate reduction as officials sought to prolong America’s current economic expansion. The Fed’s message sent the benchmark yield south, below 2.00% at one point for the first time since November 2016. In the UK, the Bank of England also kept their policy unchanged but mentioned that the perceived risk of Brexit without a deal had risen. Elsewhere, WTI crude jumped above $56 a barrel this morning after Iran shot down an American drone.
The first quarter Current Account Balance narrowed to -$130.4 billion from a revised prior of -$143.9 billion. The labor market remained tight as Initial Jobless Claims printed 216k following a prior reading of 222k while consensus called for 220k. Continuing Claims also declined to 1662k from an upwardly revised prior of 1699k vs. 1680k consensus. Philadelphia Fed Business Outlook in June sharply fell to 0.30 from 16.60 prior while consensus called for 10.40. On the contrary, Bloomberg Consumer Comfort edged higher to 61.80 from a prior reading of 61.60, and lastly, Leading Index in May came in flat, down from a revised prior of 0.10%. Later today, the US Treasury is scheduled to auction off $40 billion of 4-week bills and $35 billion of 8-week bills at 8:30 AM (PT), and $15 billion of 5-year TIPS reopening at 10:00 AM (PT).