The US$ steadies, oil prices slip, equity markets are down, while US yields rise as a cautious tone returns to markets. Global equity markets fall, oil prices are down, while the US$ bounces off lows after falling near 2% in June from increasing growth uncertainties out of China. We expect currency markets to be some what sidelined today with the US markets are closed with Juneteenth day. Today focus will be speeches from ECB Lane, Schnabel & De Guindos, & CAD low tier data. This week; Tuesday China loan prime rates, US Housing Starts Fed Bullard & Williams speech, Wednesday Fed Chair Powell will give his semi-annual report to Congress. Thursday Eurozone Consumer Confidence, Rate Decisions in UK, Switzerland, Indonesia, Norway, Mexico, Philippines, & Turkey. US Initial Jobless Claims, US Conference Board leading index. Second day of Fed Chair Semi-Annual testimony to Congress. Friday Japan CPI, EUR-US-UK PMI data.
In other news. Goldman Sachs cuts China growth forecast from 6% to 5.4% as property slowdown bites. China seen cutting its key lending benchmarks on Tuesday as its economy slows. Premier Xi hails 'progress' as he meets US Secretary of State Blinken during China trip. IMF MD Georgieva supports ECB rate hikes to tackle stubborn European core inflation. Canada wildfires heat up climate change pressure on Trudeau. UN pushes EU to help fund Ukraine's postwar clean-up. Ukraine steps up strikes deep into Russian-occupied regions. Party-gate vote on Boris Johnson set to inflame UK Tory feud. Spain's conservative PP party widens lead ahead of national election.
In currency news. The GBP tests near 14-month highs ahead of the anticipate hike by the BoE on Thursday. The US$ bounces off monthly lows on expectations of further Fed rate increases as soon as July. China falls in early trading as investors await stimulus details and the outcome of Blinken visit. CNY drops 0.5%, while Asian currencies are weaken 0.25% on average vs US$. Trading currencies are under pressure with JPY & ZAR are down 0.1%, MXN slips 0.2%, CHF falls 0.3% AUD & NZD weaken 0.35%, SEK falls 0.55%, NOK tumbles 0.9% vs US$.
Oil prices eases as banks cut growth forecasts for China. CAD holds steady, maintaining its near 3% gain vs US$ in June as commodity prices hold steady and on expectations that the BoC may have room to hike rates again in to the summer. Today sees low-tier economic data releases which should have a minimal impact on the loonie. We anticipate with the US markets closed, the C$ should hold within its current ranges today.
EURCAD weakens in early trading amid mounting China growth concerns and expectations the ECB it adopting a less hawkish stance with the prospect of just one more hike in 2023.
EUR remains capped at 1.0950 amid a firming US$. Euro starts the week on the back-foot amid a bounce in the US$ and risk aversion as investors digest US-Sino headlines and mounting Chinese growth fears. Today's sees a several ECB speakers who are expected to take a less hawkish view with the prospects of just one more hike in July before the ECB is expected to pause. The US holiday in the US is expected to see currency markets sidelined as focus shifts to the Fed Chairs testimony in front of Congress Tuesday & Wednesday.
GBPEUR extends gains to fresh 2023 highs as markets focus on Thursday's BoE interest rate decision.
GBP holds steady vs a strengthening US$ amid increasing cautious markets. The pound is holding above 1.2800 holding onto its uptrend near its 14-month highs vs US$. Investors are balancing a recovering US$ with a cautious mood returning to markets vs the prospect of another interest rate hike by the BoE on Thursday as the UK central bank continues to battle against stubborn domestic high inflation levels. Domestically the conservative party faces another week in the spot light as party-gate vote on former PM Johnson set to increase the rift within the Tory party. Today expect markets to be somewhat sidelined with the US out for Juneteenth day.