As we move into a period where a plethora of pivotal US data releases – including the May labour market report and inflation figures are due, in addition to the latest round of PMI surveys – the market continues to debate how the Fed’s policy outlook is set to evolve, after the FOMC shifted to a more data-dependent stance at the May meeting. In short, over the space of around 6 months, traders have gone from expecting a Fed pivot, to pricing a pause, to now endorsing the idea of a ‘skip’.

While Congress still needs to pass the debt limit agreement, the debate in the market has shifted to the need for the US Treasury Department (UST) to rapidly rebuild its depleted cash levels.

US equities have been performing well of late, with the S&P 500 trading at its best levels since last summer, and the tech-heavy Nasdaq having rallied to its highest in just over a year. Despite this, much has been made of the narrow breadth indices have been exhibiting, as well as the outperformance of US markets compared to DM peers, though markets continue to shrug off the plethora of bearish arguments for now.