Forexlive Americas FX news wrap: Soft Philly Fed highlights economic risks

• US April Philly Fed -31.3 vs -19.2 expected
• US initial jobless claims 245K versus 240K estimate
• Fed's Mester: Inflation is still too high. Fed has more work to do
• More from Mester: Fed has come a long way in tightening monetary policy
• Fed's Logan: Watching for further, sustained factors causing inflation
• US sells 5-year TIPS at +1.320% vs 1.310% WI
• EU consumer confidence flash for April -17.5 versus -18.5 estimate
• US leading index for March -1.2% versus -0.6% estimate
• US March existing home sales 4.44M vs 4.50M expected
• ECB's Visco: The risk of doing too much is at least as much as risk of doing too little
• Treasury Secretary Yellen: Banking system remains sound.

Markets:

• Gold up $10 to $2003
• US 10-year yields down 6.5 bps to 3.53%
• WTI crude oil down $1.87 to $77.29
• S&P 500 down 23 points, or 0.6%, to 4156
• AUD leads, NZD lags

The mood was negative when North American traders arrived in large part due to a sharp fall in Tesla shares after disappointing margins. Sentiment worsened after the Philly Fed missed expectations and signaled a probable economic slowdown. It wasn't all bad news though as the prices measures in the report fell sharply.

However the price action afterwards only hammered home how the market has moved beyond inflation and is worried about a recession and the Fed keeping rates too high. Treasury yields fell 5-11 bps across the curve and that weighed on the US dollar on most fronts. The selling was particularly strong immediately after the Philly data but later regained ground in part due to heavy late-day selling in stocks.

The central bank-speak calendar was full but none of them said anything meaningful.

“I anticipate that monetary policy will need to move somewhat further into restrictive territory this year, with the fed funds rate moving above 5% and the real fed funds rate staying in positive territory for some time," Mester said, which is about exactly what I would expect her to say.

The loonie slumped as oil fell into the post-OPEC gap, with another $2 to go to fill it. USD/CAD is bumping up against 1.35 though now and that will offer some resistance.

On Friday, we get the US PMIs from S&P Global and that's another forward-looking indicator that could get markets moving.

This article was written by Adam Button at www.forexlive.com.

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