Art Cashin doesn't see the case for another rate hike this year after economic data

  • Art Cashin says U.S. economic data is weak and doesn't see the Fed raising rates again this year.
  • He says he's impressed with European markets despite ECB President Mario Draghi's deflation comment.

Closely followed trader Art Cashin said Thursday that he is still skeptical about the Federal Reserve raising interest rates again this year.

Cashin, in an interview with CNBC, said U.S. economic data doesn't show him the strength he needs to see and doesn't help the Fed's case for additional hikes.

Still, the central bank reiterated its federal funds rate forecast earlier this month, saying it still expects its benchmark rate to reach 1.4 percent by the end of 2017.

But "what I'm seeing in the market in Europe is impressive even with Draghi trying to back down from his point that inflation is no longer a threat by saying he has to keep the easing in place," Cashin, UBS' director of floor operations at the New York Stock Exchange, said on "Squawk on the Street."

Cashin was referring to comments by European Central Bank President Mario Draghi atthe ECB forum in Sintra, Portugal, on Tuesday, speaking on strengthening and broadening recovery in the euro zone.

He said: "The threat of deflation is gone and reflationary forces are at play," sending European bond yields higher and dragging their U.S. counterparts with them.

U.S. stocks overall were lower Thursday, but bank stocks surged after the Fed cleared capital return programs for the big banks. Morgan Stanley, JPMorgan Chase, Wells Fargo, Citigroup and Bank of America were all up in early trade.

Regarding the days before the Fourth of July holiday, Cashin said to expect markets to be thinner and potentially more volatile as more people take off work. He said typically July tends to see a market that flattens out.

Cashin also spoke about German Chancellor Angela Merkel's comments on President Donald Trump in a speech about trade and climate change. Merkel said, "Whoever thinks that the problems of this world can be solved by protectionism and isolation lives under a huge misconception."

Cashin said "let's hope" that Trump and Merkel don't meet with each other for "another week or two."

— CNBC's Fred Imbert contributed to this report.

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