The US$ strengthens, oil prices firm, equity markets are up, while US yields are mixed amid Fed-pause bets. Wednesdays US CPI release showed signs of moderating US inflation, increasing expectations that the Federal Reserve is likely to pause interest-rate hikes heading into the summer. The US$ firmed as the CNY dipped to 2-month lows after continued evidence of weakness in China's post-covid recovery clouds the outlook for the global economy. Industrial metals prices fell as data out of China stirred concerns for demand from the world's second-largest economy. The Bank of England hiked rates by 25bps to 4.5%, its 12 consecutive hike, taking rates to their highest levels since 2008. In focus today US Initial Jobless Claims, US Produce Price Index and speeches by Fed's Waller & ECB's De Guindos will help provide intraday direction to currency markets.
In other news. US debt standoff overshadows the G7 finance leaders' meeting in Japan. President Biden warns of recession unless Republicans back his debt ceiling plan. The BoE expects the UK to avoid a recession and delivers the biggest revision to GDP in MPC's history. EU Lawmakers' committee agree tougher draft AI rules. US expresses hope that Sudan talks can pave way for humanitarian aid. US approves transfer of seized assets from sanctions-hit oligarch to Ukraine -FT. Italy to hold talks with China about exiting Belt & Road initiative. A record number of Canadians are trying to restructure their debts-Bloomberg. Pakistan protests turn deadly as judge extends Imran Kahn's detention.
In currency news. The GBP slips off multi-month highs, CNY falls to 2-month lows on disappointing inflation data, while commodity currencies ease on China growth concerns. CNY slips 0.1%, while Asian currencies are down 0.25% on average vs US$. Trading currencies are under pressure with JPY & NOK down 0.3%, MXN, NZD & CHF fall 0.45%, AUD & ZAR drop 0.6% vs US$.
Oil prices tick higher on positive US fuel demand, helping markets claw back some of Wednesday's losses. C$ weakens above 1.3400 amid increasing concerns over disappointing data out of China clouding the global economy out look, adding pressure on commodity currencies. Initial expectations that the BoC may hike at its next meeting after the strong jobs data has shifted with analysts waiting on more data to determine whether rates needed to rise further. Today US Jobs & PPI data will help drive intraday direction. Support rises to 1.3350 while resistance holds at 1.3465.
EURCAD continues to slip with C$ up almost 2% in May on less hawkish ECB comments dismisses expectations interest rate hikes beyond September. Support lowers to 1.4610 while resistance shifts to 1.4700
Euro weakens towards 1.0900 China growth and a less-hawkish ECB. Euro is losing momentum as the US$ edges higher on China growth concerns following a fully of disappointing Chinese data suggesting a slowing global economy. Domestically ECB policymaker Nagel dismisses reports of ECB rate hikes beyond September and reiterated that the bank is taking a "meeting-by-meeting" approach on interest rate hikes. Today focus will be on US data & EBC De Guindos comments to help provide intraday direction. Support holds at 1.0850 and resistance remains at 1.1000
GBPEUR continues to edge higher breaching 1.1500, up almost 1% in May and near 2% in 2023 as UK interest rates continue to rise providing an underlying support to the pound. Support rises to 1.1480 while resistance sits at 1.1600
GBP off multi-month highs amid a firmer US$ and the prospect that the BoE will pause rate hikes. The BoE as expected raised its key rate to 25bps to 4.5%, its 12 consecutive interest rate hike and taking rates to their highest levels since 2008. Investors will be paying close attention to BoE Governor Bailey's comments after saying that they are expecting to fall "quite rapidly" before summer. If that view translates into a downward revision on inflation its inflation forecast, markets could see that as a sign that the BoE could be approaching the end of its tightening cycle. The BoE expects the UK to avoid a recession and delivers the biggest revision to GDP in MPC's history. Focus will be BoE Governors comments & US Jobs & PPI data to help provide intraday direction. Support holds at 1.2550 and resistance remains at 1.2700
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