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Powell does not confirm a rate cut, but he is open to it

USD - United States Dollar

The US dollar index is falling 0.13 percent at the time of this writing after Jerome Powell opened the door to a rate cut. The Fed chief said that the Fed is "closely monitoring" the impact of US trade tensions. He also mentioned, "…as always, we will act as appropriate to sustain the expansion," which sounded very dovish. Despite that Powell never used the phrase "rate cut," market participants made for a choppy session, pushing the US dollar higher and lower within few minutes; however, it sparked a quick rally in the equity market.

On the release side, the ISM non-manufacturing PMI grew in May for the 112th consecutive month, coming in at 56.9 versus the expectation of 55.6. However, private payrolls came in at 27,000 in May, compared with estimates of 173,000, according to ADP and Moody's Analytics. The reading was the worst since around the time when the economic expansion began and when the jobs market bottomed in March 2010 with a loss of 113,000.

Key Movers

President Trump and Theresa May met and talked about a "very, very substantial trade deal" with the U.K., saying that even the National Health Service was on the table, to which the Prime Minister pushed back. The president asked to meet Tory leadership contenders Michael Gove and Jeremy Hunt, but was turned down by Boris Johnson. Trump declined to see Labour's Jeremy Corbyn.

Trump also killed the hopes of reaching a deal with Mexico before he imposes a 5 percent tariff next week over illegal migration, saying, "We'll probably be talking during the time that the tariffs are on and they're going to be paid." On the flip side, the Mexican president, Andres Manuel Lopez Obrador (AMLO) was more optimistic, expressing hope that a compromise can be struck.

According to BofAML, the base case now is that there is no US-China deal by the G20, but Trump will push out the deadline for additional tariffs. It also predicted that the PBOC would follow the Fed with two rates cuts this year and one next year while China GDP’s forecast for next year was lowered to 6 percent from 6.2 percent.

Expected Ranges

USD/CAD: 1.3363 - 1.3420 ▲

EUR/USD: 1.1222 - 1.1275 ▼

GBP/USD: 1.2680 - 1.2747 ▲

AUD/USD: 0.6956 - 0.7000 ▼

NZD/USD: 0.6613 - 0.6666 ▼