The Morning Update

The US$ is steady, oil prices slip, equity markets are mixed while US yields ease as markets struggle for direction. The US$ is set for weekly gains, gold slumps 1% set for weekly decline, 10-year treasury yield is flat, while equity markets struggle for direction amid mixed corporate earning concerns, ongoing Sino-US tensions and increasing expectations the Fed will hike rates in May. Cleveland Fed President Mester signaled support for another rate hike to quell inflation while highlighting the need to watch bank stress that may impact credit and dampen the economy. Today CAD Retail sales, US PMI, ECB De Guindos speech will help provide intraday direction to currency markets.

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In other news. UK Deputy PM Raab resigns over bullying investigation. Eurozone recovery unexpectedly gathered pace this month as services PMI beats expectations. G7 nations considering near-total ban on exports to Russia-Kyodo. US President Biden considering launching re-election bid on Tuesday-Bloomberg. China building cyber weapons to hijack enemy satellites, says US leak-FT. Canada matched US subsidies to win Volkswagen battery plant. Gold heist at Canada's biggest airport is probed by police. US President Biden to unveil curbs with G7 backing.

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In currency news. The US$ heads for first weekly gain since February, while CNY looks set for its biggest weekly drop in 6-weeks. Emerging currencies across Asia & Africa remain under pressure as expectations of a Fed hike in May continues to support the US$. CNY weakens 0.2%, while Asian currencies are down 0.3% on average vs US$. Trading currencies are mixed with CHF & SEK slip 0.2%, NZD, NOK & ZAR weaken 0.6%, AUD falls 0.8%, while MXN is flat, and JPY is up 0.3% vs US$.

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Oil prices steady in early trading, but prices remain set for hefty weekly loss as softening US economic data, slowing demand & ongoing recession fears is expected to keep pressure on oil prices in the coming weeks. C$ weakens to a new monthly low vs US$ as investors favor the greenback ahead of next months Fed rate decision. The impact on the C$ from the Fed raising interest rates more than BoC is not a "major concern" because of a flexible exchange rate and the BoC's independent monetary policy BoC Governor Macklem said. Focus will be on Cad retail sales for signs of inflation. Support rises to 1.3460 while resistance resets to 1.3580.

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EURCAD extends gains up 1% month-to-date as the C$ suffers from weakening commodity prices and a BoC on hold, while better than expected services PMI data gives the Euro an intraday boost.

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Euro holds steady near 1.0950 after PMI data. Euro holds above 1.0900 following mixed PMI data releases from Germany and markets remain sidelined heading into the US PMI data. German Composite and Service PMI both beat expectations, at the same time Manufacturing PMI weakened below expectations and this was a similar story for Eurozone PMI with manufacturing data weakening while Eurozone service PMI beat expectations. Investors will now focus on US PMI data to help provide intraday direction. Support holds at 1.0890 while resistance remains at 1.1000.

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GBPEUR continues to weaken, with the pound slipping over 1/2% mtd in April and down 1.4% in the last 6 months as ongoing strikes, growth stagnation and high inflation is expected to take the UK into recession potentially before year end.

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GBP slips towards monthly lows amid mixed PMI data. The pound remains under selling pressure after mixed PMI data failed to provide any support to the currency as the retail sales figure disappoints investors. The UK was the only country in western Europe that is still in double digit inflation in March and remains more than twice the US equivalent. Markets are pricing in another BoE hike in this cycle, pushing the so-called "terminal-rate" up another quarter percent towards 5%. Analysts feel that the UK is facing a deeper and more sustained recession. Support lowers 1.2345 while resistance resets to 1.2450.

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