The market mood is cheerful amid reports of a large US budget and upbeat US figures. The dollar is edging higher with yields ahead of another round of economic releases, which includes Core PCE, while gold is on the back foot and cryptocurrencies are off the highs. End-of-month flows may cause jitters. 

Big budget: US President Joe Biden is set to unveil a $6 trillion budget for fiscal 2022, on top of large infrastructure spending plans. The prospects of robust spending and faster growth have boosted stock markets while expectations of higher debt mean higher bond yields. The dollar is rising across the board.

On infrastructure, Republicans announced a near $1 trillion counter offer which still leaves them far from the White House’s updated $1.7 trillion proposal. 

The rush in Washington comes ahead of a long Memorial Day weekend, and the end of the month. Money managers have been adjusting their portfolios after a bullish May in equity markets and losses for the dollar. Choppy trading is likely on Friday. 

Thursday’s US data releases were mostly upbeat, with Durable Goods Orders non-defense ex-air – the core of the core – jumping by over 2% in April, far better than expected. Jobless claims dropped to 406,000 last week, also exceeding estimates. These figures outweighed misses on headline orders and no change to growth figures.

The highlights on Friday are Personal Income, Personal Spending and Core Personal Consumption Expenditure (Core PCE) figure – the Federal Reserve’s preferred measure of inflation. It is set to top 2% YoY, the bank’s target. 

Gold, which dropped below $1,900 amid the increase in Treasury yields, is set to react to any surprise in this indicator.

EUR/USD is trading below 1.22 amid renewed dollar strength while GBP/USD is trading close to 1.42. Sterling received a boost from Gertjan Vlieghe, a member of the Bank of England who hinted at a rate hike in early 2022. On the other hand, the next stage of the reopening remains in doubt due to the spread of the COVID-19 variant first identified in India. 

Cryptocurrencies have been on the back foot, with Bitcoin falling below $37,000 and Ethereum under $2,600. Volatility remains elevated and may further increase over the weekend.