GOLD: Gold Unwinds Post-WSJ Fed Report Gains

BoJ Governor Ueda has made remarks at an event in Tokyo. The comments appeared to cover a lot of familiar ground since the last BoJ policy update. Ueda reiterated the driver of the recent downside forecast revisions for both growth and inflation (trade uncertainties). Still, the central bank will adjust the degree of monetary accommodation if the economy improves as expected.

• Some of the key headlines are outlined below: "BOJ GOV UEDA: BOJ HAS MANAGED TO DE-ANCHOR INFLATION EXPECTATIONS FROM ZERO, BUT HAVE YET TO RE-ANCHOR THEM AT 2%, WHICH IS WHY WE ARE STILL MAINTAINING ACCOMMODATIVE POLICY STANCE - [RTRS]"
• BOJ GOV UEDA: BUT WE CONTINUE TO EXPECT UNDERLYING INFLATION TO GRADUALLY MOVE TOWARD 2% OVER THE SECOND HALF OF OUR FORECAST HORIZON - [RTRS]
• "BOJ GOV UEDA: BUT GIVEN UNDERLYING INFLATION IS CLOSER TO 2% THAN A FEW YEARS AGO, WE NEED TO BE CAREFUL ABOUT HOW FOOD PRICE INFLATION WILL IMPACT UNDERLYING INFLATION" RTRS
• *BOJ'S UEDA: TO ADJUST EASING IF ECONOMY IMPROVES AS EXPECTED
  *BOJ'S UEDA: VITAL TO JUDGE IF OUTLOOK IS REALIZED WITHOUT BIAS" - BBG.
• USD/JPY has drifted lower as Ueda spoke, the pair last near 142.30/35, up around 0.35% in yen terms so far today. Lows yesterday were at 142.23. 

The ESM5 Overnight range was 5871.00 - 5895.00, Asia is currently trading around 5875. A quiet open for stocks this morning, overnight trading was pretty muted with most of the market off.

• Bloomberg - “Nvidia results on May 28 key to either breaking or cementing their recent slump. The chipmaker has been doing the heavy lifting since the April 2 announcement of reciprocal tariffs. Its outlook will be crucial given the macro risks clouding sentiment.”
• Apollo: "The bubble in AI valuations was simply the result of a long period with zero interest rates. With upward pressures on inflation coming from tariffs, deglobalization, and demographics, interest rates will remain high and continue to be a headwind to tech and growth for the coming years. See Graph Below. https://www.apolloacademy.com/ai-bubble-fueled-by-zero-interest-rates/"
• Stocks managed to claw back all of its losses attributed to Trump's 50% tariffs on Europe, the decision postponed to 9th July. 

• In the short-term the move higher in global yields particularly in the long-end is starting to matter, providing headwinds to stocks that have lost their upward momentum. In the short-term stocks do still look overbought but look for demand to materialize once more back towards the 5600/5700 area.

  Fig 1: Employment Growth In The Mag 7

  

  Source: Apollo

TYM5 is trading 110-05+, up 0-03 from its close. 

• The US 2-year yield opens around 3.98%, down 0.01 from its close.
• The US 10-year yield opens around 4.497%, down 0.01 from its close.
• Bloomberg - “Investors seemed to pay little mind to Treasury Secretary Bessent’s efforts at reassurance at the end of last week, with the 30-year yields essentially unchanged on the day at 5.04%. His comments about the potential for progress on SLR reform — which could make it easier for banks to buy Treasuries — also failed to generate a boost despite his comments that such a shift could bring yields down substantially.”
• Bloomberg - “Long-dated US bonds remain vulnerable to concerns that President Trump’s tax bill will worsen the country’s debt burden.”
• “While the outlook for US Treasuries looks weak with the tax bill looming in the Senate, they should find some support with PCE data this week set to prove that disinflation is becoming more real.”(BBG)
• The 10-year look likely to see supply on any dips in yield in the short-term, should yields hold above 4.40% the target looks to be the 4.75% area. Watch for any announcements relating to the SLR though, this could have an impact on a market that is already quite short.
• Data/Events: Durable Goods, FHFA House Price Index, Conference Board, Dallas Fed Man Activity.