US indices continued to decline Thursday with the Dow breaking 17,500 and the S&P 500 breaking 2,040 to complete head and shoulders top formations. May and June have historically been the second weakest time of the year for stocks and today’s actions suggest that a seasonal correction for this year may be getting underway. The excuse for this year’s seasonal correction appears to be growing speculation that the Fed could raise interest rates as soon as June. Today, New York Fed President Dudley, the most dovish of the Fed’s Big 3 voters indicated that he expects rates to rise in June or July if current trends continue. He also noted he is pleased that markets are starting to recognize the potential for a rate hike soon. Richmond Fed President Lacker, a known hawk also called for a June rate increase while Vice-Chair Fischer did nothing to contradict a more hawkish tone. Dudley and Lacker noted, however, that the Fed could hold off in June due to uncertainty over the Brexit vote coming a week or so after the June FOMC meeting. This to me appears to be a red herring. The negative reaction to developments favouring the Leave side has been fading for months indicating traders have come to terms with the potential for a close vote and the prospect of a Brexit. The big GBP rally earlier this week on an outlier poll suggesting the Remain side leading shows that ramifications of a Leave win had been pretty much priced in and a possible Remain win was seen as a surprise. Today’s strong UK retail sales shows the debate is not dragging on the economy making the prophecies of doom and uncertainly coming from the unelected establishment look increasingly unfounded and tiresome. A decision by the Fed to delay a rate hike on Brexit concerns could be seen as the US letting Britain tell them what to do and throwing away nearly 240 years of independence. With an election campaign underway in the US this year the domestic campaign timetable is likely to take more precedence than overseas events. On that basis, June makes more sense for a Fed move in the lull between the end of primaries and the start of conventions than July where the Fed meeting is scheduled between the conventions. Crude oil has been quite active today, staging an early selloff then clawing it all back in the afternoon. Crude initially fell in response to the USD rally but rebounded on the recognition that the Fed is talking a rate hike because the economy (and the outlook for energy demand) is strengthening The US Dollar index levelled off near 95.00 where it has already priced in two interest rate increases this year. Gold remained under pressure falling 1.3%. Oil sensitive currencies like CAD, NOK and RUB were under pressure but AUD and NZD have started to rebound. There isn’t much news due from Asia Pacific countries today but global trends could keep markets active into the weekend. Currency markets may be particularly active over the next few days with a G7 Finance ministers meeting being held in Japan. Some of the talk at these types of meetings centres around currency levels and currency wars, which could influence forex trading. Earlier today we saw a duel of doves in Scandinavia with Norges Bank’s Olsen leaving the door open to negative rates in Norway (despite oil on the rebound) and the Riksbank’s Skingsley talking about helicopter money. The timing of these positioning moves indicate that G7 meeting developments could have wider implications for forex trading. Friday brings retail sales and inflation reports for Canada, the last major data announcements ahead of next week’s Bank of Canada meeting. This news could spark activity in CAD and Canadian stocks Friday along with swings in the oil price. Corporate News There have been no major announcements after the US close today. Economic News Significant announcements released overnight include: US jobless claims street 275K US Philadelphia Fed street 3.0 US natural gas street 78 BCF UK retail sales 4.3% vs street 2.5% UK retail ex auto & fuel 4.2% vs street 2.0% Eurozone construction output (0.5%) vs previous 2.5% France Q1 unemployment rate 9.9% vs street 10.2% France Q1 unemployment chng (3K) vs street (24K) and previous (47K) Norway trade balance NOK 10.6B vs previous NOK 9.1B Upcoming significant economic announcements include: (Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal 12:30 am in London and 8:30 am in Singapore) May 19-21 G7 finance ministers meet in Japan 11:00 am BST UK CBI orders street (13) 8:30 am EDT Canada retail sales street (0.6%) vs previous (0.4%) 8:30 am EDT Canada retail ex auto street (0.4%) 8:30 am EDT Canada consumer prices street 0.3% vs previous 0.6% 8:30 am EDT Canada core CPI street 1.7% vs previous 1.3% 9:00 am EDT FOMC Tarullo speaking 10:00 am EDT US existing home sales street 5.40M