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? Turkish lira relief rally goes into reverse.
? Dollar slips on trade concerns.
? Italy's bonds, stocks gain on political progress.
? Most European stock markets rise after mixed trading in Asia.
The dollar slipped on fresh trade concerns and benchmark Treasury yields rose after the Federal Open Market Committee said the next rate hike could come soon. A relief rally in the Turkish lira went violently into reverse as investors questioned whether an emergency central bank rate hike was sufficient. Stock markets were mixed and futures pointed to a flat opening on Wall Street.
The dollar lost its footing after the U.S. said it was considering duties on imported vehicles. Trade in vehicles has also been a sticking point in North American Free Trade Agreement negotiations. The Japanese yen rose 0.34% against the dollar by 6:56 a.m. ET, and the euro was up 0.21%.
While the effect of U.S. protectionist policies on foreign exchange markets has been ambiguous, "speculation tends to be [dollar-]negative as the currency prices in some notion of a protectionist risk premium," according to strategists at ING Research.
Ten-year Treasury yields rose 2 basis point to 3.009% after the Fed maintained its stance of a gradual policy tightening but noted that the next hike could come "soon."
"Markets dialed back expectations of four rate rises this year, to a maximum of three," CMC Markets' Michael Hewson said in a note to investors.
The lira lost 2.71% against the dollar in spite of a 300-basis-point rate hike by the Central Bank of Turkey on May 23. Credibility issues will continue to weigh on the lira and the central bank is expected to further hike rates before its June 7 meeting, Cristian Maggio, head of emerging markets strategy at TD Securities, said.
"More tangible macroeconomic improvements such as declining CPI and a narrowing current account deficit will be required to slowly restore the CBRT's reputation, heavily dented by years of political interference," he said.
Yields on 10-year Italian bonds shed over 5 basis points to 2.349% as President Sergio Mattarella tasked the little known academic Giuseppe Conte to lead a government backed by a populist coalition that has vowed to shake up the European Union. It will be difficult for a government led by the populist Five Star Movement and the far right League "to approve in full their economic program and we do not rule out snap elections as early as next year," according to Fabio Fois, a senior European economist at Barclays.
The FTSE MIB gained 0.26%. The 10-year yield on German Bund increased by 1 basis point to 0.516%.
Most other European markets rose, following a mixed session in Asia. The Euro Stoxx 50 added 0.28%, and the FTSE 100 slipped 0.05%. Bayerische Motoren Werke AG's shares fell 2.14% and Daimler AG's stock was down 3.1%. The Shanghai SE Composite fell 0.45% while Hong Kong's Hang Seng Index closed 0.31% higher. The S&P 500 is set to open 0.05% higher.
Brent crude dropped 0.8% to $79.17 per barrel on the ICE Futures Exchange. Gold was up 0.46% at $1,300.80 per ounce.
More from S&P Global Market Intelligence:
Fed officials say next hike could come 'soon,' inflation may surpass 2%
US-China deal seen benefiting soybean exports; barriers remain for others
Pompeo: North Korea seeks economic aid in exchange for scrapping nuclear program
Rail, mines, power need solution to keep coal competitive, rail CEO says
'Extra-market additions' threaten competitive US power markets, new paper says
Greenfields key to gold's future, says St Barbara CEO
Fate of Anbang's overseas assets still undecided 3 months after state takeover
Nestlé invests in Chinese dairy company Ningxia Cezanne
The day ahead:
8:30 a.m. ET — U.S. jobless claims (Econoday consensus: 220,000)
9 a.m. ET — U.S. FHFA house price index (Econoday consensus: 0.6% monthly)
9:45 a.m. ET — U.S. Bloomberg consumer comfort index
10 a.m. ET — U.S. existing home sales (Econoday consensus: 5.6 million)
10:30 a.m. ET — U.S. EIA natural gas report
10:35 a.m. ET — U.S. Fed's Raphael Bostic speaks
2 p.m. ET — U.S. Fed's Patrick Harker speaks
4:30 p.m. ET — U.S. Fed balance sheet
4:30 p.m. ET — U.S. money supply

