The Morning Update

The US$ steadies, oil prices are higher, equity markets are mixed, while US yields rise ahead of US jobs data. The US$ pared declines, US equity futures firm as investors focus on the US Nonfarm Payrolls release today for clues on the strength of the economy and assess if the uncertainty among US regional banks will help bring forward a Fed rate cut within 2023. Slower US growth is expected in April with NFP forecasted increasing 180k in April, Unemployment is seen rising to 3.6% & average hourly earnings forecast gaining 0.3% to 4.2% y/y. Apple inc shares gained after the company reported sales of iPhones rebounded in Q1, while European shares steadies as they look set for their worst weekly decline in near 2-months. Today alongside US Jobs data focus will also be on CAD Unemployment rate, and Fed Cook speech to help provide intraday direction to currency markets.

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In other news. UK Conservative suffer 'terrible' night of local election losses. China assures Russia, India of deepening 'cooperation'. Russia's Prigozhin says Wagners fighters will quit Bakhmut to "lick our wounds". A Washington stalemate on whether to increase US debt ceiling has raised the risk of a default as early as June. Drones attack Ukrainian capital, Moscow says US behind Kremlin drone. China's services activity grows but at slower pace - Caixin PMI. ECB raised rates Thursday as ECB president Lagarde warns of 'more ground to cover'.

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In currency news. The US$ remains under selling pressure as rate-cut bets weigh on the greenback ahead of NFP. The pound hits 1-year highs vs US$ and 1-month high vs Euro ahead of next weeks BoE rate decision. CNY remains rangebound, unable to gain from the weaker US$ as weak domestic data raises concern for its economic recovery. CNY is flat, while Asian currencies firm 0.2% on average vs US$. Trading currencies are mixed with ZAR & CHF falling 0.6%, while MXN is flat, JPY up 0.1%, NZD gains 0.3%, AUD & SEK firm 0.55%, and NOK rallies 0.8% vs US$.

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Oil prices rise 1%, but remain on track for their third weekly decline on fears of weakening US economy and slowing Chinese demand. C$ strengthens aggressively to 2-week highs vs US$ as oil prices rebound and US weakens on increasing rhetoric that the Fed may ease interest rates. BoC governor Macklem said the bank is ready to tighten further if Canadian inflation gets stuck significantly above target. Alongside the key US NFP, focus will be on the CAD unemployment rate which is expected to tick higher to 5.1% vs 5% in March. Support lowers to 1.3460 while resistance resets to 1.3550.

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EURCAD weakens, giving back its early gains in May breaking back below 1.1490 heading in to the Canadian & US jobs data today. Support resets to 1.4850 while resistance slips to 1.4970.

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EUR clings to modest gains vs US$, but weakens vs its peers ahead of the US jobs data. Euro remains on the back-foot after the ECB hiked interest rates 0.25% as expected, ECB President Lagarde clarified that they were not pausing the tightening cycle. Despite the hawkish ECB statements Euro failed to gain momentum as US regional bank concerns caused investors to seek refuge in the USD. Today focus will be on the US jobs data and this will be the primary market driver for currency markets today. Support sets at 1.0960 while resistance lowers to 1.1060.

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GBPEUR edges higher as focus shifts to the BoE interest rate decision next week. Support sits at 1.1380 while resistance resets to 1.1475.

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GBP breaches 1.2600, testing near 1-year highs vs US$ as focus shifts to BoE rate decision next week. The pound tested just shy of its 1-year high vs US$ and set a 1-month high vs Euro as investors eyed the BoE rate decision next week. Many analysts expect the BoE will have to keep raising rates, given that inflation is much stronger in UK running at 10.1% y/y in March vs 5% in the US. Domestically UK PM Sunak's conservatives looks set to lose up to 1,000 seats and could put the Labour party on course to win the next general election. The pound is rallying on the prospect of higher rates, but underlying prospect of a recession in the UK remains high with the ongoing strikes continuing to impact the UK growth prospects. Support remains at 1.2525 while resistance rises to 1.2650.

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