The USD trades lower, oil price higher, equities are off while US bond yield moves up. FOMC minutes released yesterday indicated a near unanimous decision to hold rate stable in June choosing to see the impact of the recent hikes on the economy. Little reaction was seen after the release of the minutes, where expectation of a July rate hike is expected and a 1 in 3 chance of another hike in 2023. U.S. Treasury Secretary Janet Yellen is set to start a four-day visit to Beijing. Key topics to be discussed are climate change, pandemic preparedness, and debt distress.
In other news Russia fired cruise missiles in Lviv, taking the war far from the front line of the war. Top officials from Turkey and Sweden head to NATO to try to overcome membership concerns. U.S. says it prevented Iran from seizing 2 oil tankers in international waters. China says the UK is sheltering fugitives after Hong Kong put bounties on the heads of eight pro-democracy activists who fled the territory.
In the currency markets The USD lost a bit of steam after the FOMC minutes release. APAC currencies led the way with the JPY up 0.4%, NZD up 0.27%, AUD up 0.16% and CNY up 0.11%. The Northern currencies are mixed with the NOK down 0.35%, SEK down 0.31% and DKK up 0.12%. In the trading currencies we saw the MXN weakened by 0.31% and the ZAR by 1.17%.
The USD/CAD hedges towards the 1.3300 level where it’s finding some resistance. With the FOMC minutes out of the way the markets are focusing on this Friday’s US and Canadian employment figures. As an observation, when the C$ was strengthening last month, it found some strong resistance around the US$ 0.75 (1.3333) – one has to wonder if this may offer some support for the C$.
EURCAD continues to rebound off its lows and is hovering around the 1 month high.
EUR/USD remains unable to gather sustainable upside traction. Factory Orders in Germany expanded more than expected at a monthly 6.4% in May, while Retail Sales in the whole euro area came in flat MoM in May and contracted 2.9% from a year earlier. In terms of monetary policy, there are no major updates, expectations remain stable regarding an anticipated 0.25% interest rate hike from both the (ECB) and the (Fed).
EUR/GBP recover from the lowest levels in two weeks on the back German Factory Order jump in May and BoE Governor Andrew Bailey cites qualitative measures to tame inflation.
The Pound has rebounded sharply as BoE Bailey has assured inflation softening. Steady United Kingdom Services PMI provided some strength to the Pound Sterling.
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