The Morning Update

The USD steadies, oil prices ease, and equity markets are up, while US yields rise ahead as the US earning season starts today. The USD holds near 15-month lows, while European shares eye their best week in over three months on disinflation hopes which would allow the Fed & ECB to pause rate hikes beyond July. The earning season also kicks off in the US with major lenders JPMorgan Chase & Co., Wells Fargo, and Citibank Inc reporting today. In commodities oil headed for a 3rd weekly gain as supply disruptions tightened the market and Gold is set for its best week since April. Today alongside US bank earnings, the Michigan Consumer Sentiment Index and UoM 5-year Consumer inflation expectations will both be monitored closely to help provide intraday direction to currency markets.

‍

In other news. Bridgewater warns US inflation fight is far from over-FT. Gatwick airport workers to strike for 8 days in July & August over pay. Hollywood shuts down for the first time in six decades as actors strike. In Canada union, employers reach a tentative 4-year deal to end the B.C port strike. Australia picks first female central bank chief after backlash over rate rises-Reuters. Thailand's move forward seek to curb senate powers after the loss in the PM vote. UPS strike could be costliest in the US in a century, study says. Heavy rain in China's Chongqing threatens rivers, as mass evacuations continue.

‍

In currency news. The tumbling USD finds support near 15-month lows. The SEK is set for its biggest weekly gain in 14 years. AUD & NZD head for their week in 2023, while the CNY climbs to a monthly high on the back of a weaker USD. CNY firms by 0.2%, while Asian currencies are up 0.1% on average vs US$. Trading currencies are mixed with ZAR tumbling 0.8%, SEK receding 0.4%, NOK & MXN slipped 0.2%, JPY down 0.1%, CHF is up 0.1%, and AUD & NZD advanced 0.25% vs US$.

‍

Oil prices ease in early trading but overall headed for a 3rd weekly gain as supply disruptions in Africa and a reduction in shipments from Russia tightened the market. CAD is sitting near 10-month highs, holding on to weekly gains as US inflation data increases expectations the Fed is nearing the end of its interest rate hiking campaign which has put significant selling pressure on the USD. The Cad has also benefited from the BoC rate hike on Wednesday and the news that the BC dock worker strike has ended. Intraday US economic data and US bank earnings will be in focus today.

‍

EURCAD continues to edge higher toward near 4-month highs, up 1.5% in July as ECB hawkish comments continue to provide investor confidence in the single currency.

‍

EUR extends gains to multi-month highs of 1.1250. The euro continues to press higher as the USD remains under selling pressure despite a cautious tone returning to markets as investors await the US consumer sentiment data. The USD remains on the back foot after Wednesday's softer inflation data and Thursday's US PPI which rose only 0.1% y/y in June. We expect the euro to stall into next week as the Fed enters its blackout period ahead of interest rate decision on July 26th. Today US confidence data will be monitored closely for intraday guidance.

‍

GBPEUR slips to near-weekly lows investors shift their focus to the Fed & ECB rate decisions at the end of July.

‍

GBP consolidates gains, holding above the key 1.3100 as US data eyed. The pound appears to be capped below 1.3150 as investors start to shift their focus to the Fed & ECB rate decisions at the end of July. The GBP has gained nearly 150bps over the last 6-days, testing 1.3142 its highest level since April 2022 after the BoE commented that UK key lenders all passed their stress test and setting the stage for a 50bps rate hike from the BoE on the 3rd of August. The Chair of the UK's Office for Budget Responsibility told the BBC that they were observing inflationary pressures becoming more embedded in the economy. Today US data & US bank earnings will help guide intraday direction.