The USD eases, oil prices strengthen, equity markets rally, and US yields gain as earnings lift optimism. The USD eased after Fed Waller backed a July interest rate cut to support a softening labour market. Fed Waller's comments failed to move markets, with swaps pricing in a near-zero chance of a Fed cut in July and less than a 60% chance of a 25bps rate cut in September. Global equity markets extended gains on Friday with upbeat earnings and resilient US economic data helping to support risk-on sentiment. "All that helps to reinforce the bull case for equities, with this solid underlying economic momentum likely to see earnings growth remain healthy," Said Michael Brown at Pepperstone. Elsewhere, oil prices rise on fresh EU sanctions, Bitcoin eases, gold is set for a weekly decline, and platinum reaches its highest level in over a decade. In focus today, US Building Permits, Housing Starts and the Michigan Consumer Expectations Index, alongside comments from Fed's Waller, will help drive currency markets today.
In the news. The EU imposes new sanctions on Russia, targeting the banking and energy sectors. Syria's president accuses Israel of seeking 'endless chaos' as his forces pull back. The EU offers Trump tit-for-tat car tariff cuts. The US Congress passed $9 billion in cuts to public broadcasting and foreign aid. South Africa brushes off Treasury Secretary Scott Bessent's absence at the G20 meeting. The Bank of England scrutinizes lenders for dollar risk amid concerns about Trump. Canadian companies are gearing up for a significant boost in defence spending. Canada Post union calls on employees to reject latest offer.
In currency markets. The USD Index eases amid growing risk-on sentiment, while the JPY remains under pressure ahead of Japan's Sunday election. The ZAR strengthens as G20 finance ministers meet in South Africa, aiming to wrap up their two-day meeting. CNY and Asian currencies are up 0.1% on average against the USD. Trading currencies turn positive, with JPY down 0.15%, CHF flat, DKK, KWD, CZK & MXN up 0.15%, PLN & AUD firmed 0.35%, NZD & SEK gained 0.45%, and NOK & ZAR strengthening 0.75% against the USD.
In commodity markets. Oil, Copper and Soybean prices strengthened 1.35%. Natural Gas gained 0.8%. Gold prices up 0.4%. Silver prices firmed 1.2%, and Wheat prices rallied 1.7%.
CAD rebounds off yesterday's 3-week lows against the USD as the greenback softens in early trading, but the loonie remains vulnerable to further weakness amid ongoing trade uncertainty. The TSE hits a record high, supported by Canadian economic resilience. Meanwhile, Canadian Finance Minister Champagne, speaking at the G20, stated that economic uncertainty cannot be the new norm, referring to the growing trade restrictions and tariffs from the US. Intraday, the focus will be on Fed's Waller's comments and US consumer sentiment to help provide direction to the loonie.
EURCAD edges higher in early trading despite rallying commodity prices, as the euro benefits from the rising risk-on sentiment.
EUR finds support from improving market sentiment amid stronger earnings and improved economic data. The euro rebounds in early trading after testing multi-week lows and is expected to end the week in negative territory as EU-US trade negotiations drag on. A batch of positive earnings from Netflix, TSMC, PepsiCo, and others helped boost market sentiment, triggering a rally in equities and eroding the appeal of the safe-haven USD. Domestically, German PPI showed a 0.1% growth in inflation, above the 0% forecast and after a 0.2% contraction in May. Intraday, the US consumer data will drive the single currency, but we expect investors to remain cautious amid the ongoing EU/US trade negotiations.
GBPEUR slips in early trading amid ongoing concerns of a cooling UK labour market and expectations of a possible BoE rate cut.
GBP holds steady below 1.3450 amid a softening USD. The pound gives back some early gains against the USD as investors cool to the pound following Thursday's easing of UK labour market conditions. The cooling UK labour market is increasing calls for the Bank of England to reduce interest rates, but increasing inflationary pressure, as reflected in Wednesday's UK CPI report, is putting BoE officials in an increasingly no-win position. The pound bounced off a two-month low of 1.3370, but investors remain bearish, with some expecting a possible move back to 1.3140 (May 12th lows) if the BoE eases interest rates.
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