The US$ steadies, oil prices firm, equity markets are down, while US yields ease as focus shifts to the ECB. Currency markets are sidelined, European equities fall as investors turn their focus towards the ECB after the Fed hiked 25bps on Wednesday. The ECB is predicted to raise interest rates by 25bps and is expected to signal that it may slow the pace of future rate increases after its preferred measure of inflation dipped for the first time in 10 months. US regional lenders slumped on renewed worries about financial stability, PacWest is down 40% in premarket trading this morning, while Western Alliance Bancorp also tumbled heading for a 5th straight decline. Today alongside the ECB rate decision sees a busy economic docket with US Goods & Services Trade balance, Initial Jobless Claims, Nonfarm Productivity, ECB Press Conference, CAD International Merchandise Trade, Ivey PMI, BoC Governor Macklem Speech and on the corporate front Apple reports its earnings today.
In other news. China's economic recovery showed further signs of imbalance with manufacturing activity contracting for the first time in months.-Bloomberg. UK mortgage approvals beat forecast to touch 5-month high. Eurozone April business activity grows on strong service demand PMI. Ukraine President Zelensky speaking at the Hague after strikes in Ukraine, says Putin must face justice. US approves world's first RSV vaccine. The White House to meet Microsoft, Google CEO's on AI dangers. UK PM Sunak faces his first major electoral test today as England cast ballets in local elections. China's holiday tourism rebounds to pre-covid levels helps boost outlook.
In currency markets. The US$ rebounds from intraday lows as safe-haven buying returns on increasing concerns for US regional bank stability. CNY holds steady as domestic tourism booms. CNY is flat, while Asian currencies are up 0.1% on average vs US$. Trading currencies mostly improve with MXN & SEK are Flat, JPY, ZAR & AUD up 0.1%, NZD gains 0.35%, NOK strengthens 0.5% while outlier CHF weakens 0.4% vs US$.
Oil prices recover after plunging 9% in the first 3-days of May after the Fed opens the door to pauses its tightening cycle and demand worries linger. C$ struggles to strengthen holding above 1.36 vs US$ on new US regional banking fears, increasing interest divergence between Fed & BoC and lower commodity prices. Today sees CAD International Merchandise Trade, Ivey PMI, and BoC Governor Macklem Speech, alongside US economic releases will help provide intraday direction. Support holds at 1.3570, while resistance sits at 1.3650.
EURCAD slips in early trading as investors are mostly sideline ahead of the ECB interest rate decision this morning. Month-to-date C$ is down 0.75% vs EUR and is down 12% six-months to date vs EURO. The EBC rate decision & statement will help provide intraday guidance to the cross today. Support holds at 1.4980 while resistance sits at 1.5100.
EUR straddles 1.1050 ahead of the ECB interest rate decision. Euro's bullish momentum stalls as investors step to the sidelines ahead of the ECB rate decision after testing 1.1100 earlier in the session. The ECB is forecast to raise its key rate by 25 basis points following the May policy meeting. Earlier this week, the ECB's Bank Lending Survey revealed the negative impact of high rates on credit demand. Investors are looking to the ECB statement to see if the central bank plans to pause or continue its hiking policy. Markets will be focused on US regional bank updates, and will pay lose attention to the initial jobless claims and the Q1 unit labor costs from the US. Support holds at 1.1000 and resistance holds at 1.1100.
GBPEUR edges higher as Euro consolidates heading into the EBC interest rate decision today. Results from the English local elections will likely impact the pound later in the day with many expecting the conservative party to see its support come under pressure. Support holds at 1.1325 and resistance sits 1.1400.
GBP eases after testing towards 1.2600 on a weaker US$. The pound benefited from the Fed signaling it was pausing, which put the US$ under initial selling pressure. We feel the pound will be remain toppish at 1.2600 as concerns increase over the US regional banking sector and the potential of contagion could see a return to safe-haven US buying. Markets will focus on PM Sunak's first test at PM as voters head to the polls in England's local elections with 230 local councils, and with 8,000 councillor's seats up to grabs. Intraday the ECB rate decision and a busy US economic docket will help provide direction to the pound today. Support holds at 1.2480 while resistance remains at 1.2600.
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