A downward revision to U.S. GDP on Thursday stoked expectations that the Federal Reserve has room to cut rates this year, although investors for a change took the bad news (of weaker growth) as bad news, taking U.S. stocks, the dollar and Treasury yields lower.
Markets are pricing in 35 bps of cuts from the Fed this year, with a 50% chance of a rate cut in September.
The ever-shifting expectations around U.S. rates has taken a toll on the dollar, which is set for a first monthly loss this year against the euro, Sterling, Aussie, kiwi and even the yen, although the yen’s miniscule gain is a result of the suspected intervention earlier this month.
In Asian hours, equities broadly gained, while the dollar regrouped. China stocks rose even as the data showed the nation’s manufacturing activity unexpectedly fell in May, according to an official factory survey.
Meanwhile, markets so far have shrugged off the Donald Trump verdict after he became the first U.S. president to be convicted of a crime on Thursday when a New York jury found him guilty of falsifying documents to cover up a payment to silence a porn star ahead of the 2016 election.
Shares of The Truth Social parent Trump Media & Technology Group, which is majority owned by Trump, dropped 6.5% late on Thursday after the verdict.
