The Morning Update

The US$ strengthens, oil prices stall, equity markets are down, while US yields are mixed as slowing growth & rate concerns dents risk sentiment. The US$ rebounds, oil is set for another monthly decline on weakening US & EU data, while inflation persists increasing expectations that both the Fed & ECB will raise interest rates next week. Eurozone economy squeaked out 0.1% growth Q1, missing expectations as Germany stagnates. Amazon stock weaken as uncertain cloud outlook overshadowed its revenue beat. China's factory activity likely expanded at a slower pace in April, a Reuters poll showed on Friday. Today sees a busy economic docket with German inflation data, US Core PCE. Personal Income, Michigan Consumer Sentiment, Chicago Purchasing Manager Index, & CAD GDP releases which will help provide some intraday direction to currency markets intraday.

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In other news. BoJ's new chief keeps ultra-low rates, embarks on new policy review. Sony expects profit to slip despite record playstation 5 sales. UK PM Sunak faces first tests of his leadership in local polls. China flies combat drone around Taiwan; US navy plane transits strait. Russia kills 12 in its biggest Ukraine air strikes in nearly 2-months. Taiwan slides into recession after worst quarterly contraction since 2009. US officials lead urgent rescue talks for First Republic-sources. King Charles coronation seized on by republicans as chance to ditch monarchy. Speaker McCarthy seeks to turn up debt ceiling temperature on President Biden.

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In currency markets. JPY dropped to a 9-year low vs Euro, slips to a 6-month low vs GBP after BOJ maintains its ultra-low rate policy. CNY steadies, but is set for a losing month vs US$. Commodity currencies remain under selling pressure as growth concerns impacts pricing. CNY is flat, while Asian currencies are down 0.2% on average vs US$. trading currencies are under pressure with CHF & MXN slip 0.2%, NZD down 0.3%, AUD, ZAR & SEK weaken 0.7%, NOK falls 1.2% and JPY tumbles 1.6% vs US$.

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Oil prices head for another monthly decline on disappointing US & EU data and uncertainty over further interest rate hikes weigh on the demand outlook. C$ weakens alongside its commodity peers taking the loonie down 1% in April, hitting a fresh 4-week low as risk sentiment eased heading into the Fed & ECB interest rate decisions next week. Today sees a flurry of key data releases including US Core PCE which is a key guide for the Fed and in Canada focus will be on the GDP which is expected to ease to 0.2% mom-Feb vs 0.5% mom-Jan. Support resets to 1.3600 and resistance rises to 1.3725.

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EURCAD continues to edge higher strengthening 2.4% in April as markets are focused on the ECB interest rate decision next week. Support holds at 1.4950 while resistance steadies at 1.5050.

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Euro dips below 1.1000 vs US$, but maintains its strength vs its currency peers. Euro lost some traction vs US$ after data from Germany & the Eurozone showed a loss of growth momentum in Q1. German growth was flat, Spain beat expectations up 0.5% vs 0.2% Q4 while French GDP met expectations and the Eurozone missed slightly at 1.3% vs expectations of 1.4%. Focus shifts to the German inflation report which is expect to slip marginally to 7.3% vs 7.4%, well above 2% targets and supporting expectations that the ECB will maintain its hiking policy at next weeks rate decision. Today US data will be in focus to provide intraday direction, month to date Euro strengthened almost 1.5% vs US$. Support holds at 1.0940 while resistance resets to 1.1050.

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GBPEUR advances slightly after the disappointing growth data from Europe, while in April the currency pair trading is flat, but over the last 6-months the pound has fallen 2% vs Euro. Support holds at 1.1300 while resistance remains at 1.1400.

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GBP ends a volatile week trading below 1.2500 heading into to a flurry of US data releases. Increasing risk-off sentiment is keeping pressure on the pound vs US$ as investors appear unwilling to return to the pound until after the Fed & EU rate decision next week. Today's March US PCE inflation & Q1 employment cost index data will be watched closely by investors and could be a primary driver of intraday direction. Rishi Sunak faces his first big electoral test as British prime minister next week in local polls where the opposition Labour Party hopes to capitalize on a year of chaos for the governing Conservatives, ahead of a national election expected next year-Reuters. Support resets to 1.2410 while resistance remains at 1.2520.

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