The Morning Update

The USD steadies, oil prices firm, equity markets rally, and US yields rise as markets focus on trade tensions and economic data. The USD steadied against major currencies as markets await the US ADP employment change reports and the consequences of the 50% increase in tariffs on steel and aluminum as they take effect. Global equities rallied following Tuesday's stronger-than-expected jobs openings report, which is seen as a good sign for the US economy, as many had worried that the tariff uncertainty would weigh on business growth. US futures hold onto two days of gains as investors await today's ADP report and Friday's key US Nonfarm Payroll. "A confluence of clearer macro and political signals is giving markets fresh air," said Hebe Chen, at Vantage Markets in Melbourne. "Optimism brewed on Wall Street overnight after upbeat job data, and was amplified in Asia as Korea's post-election clarity. Today, they've handed investors a solid reason to stay risk-on." Elsewhere, oil prices have increased as expected, and OPEC+ output has increased, offsetting Canada's supply pressure. Bitcoin prices slipped to $105.9k, while gold and silver prices increased in early trading. In focus today, US ADP Employment Change, CAD BoC Interest Rate Decision & Monetary Policy Statement, US ISM Services PMI report, and Fed's Beige Book, will help guide intraday direction of currency markets.

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In the news. US tariffs of 50% on steel and aluminum come into force. Merz plans a €46 billion corporate tax break to revive the German economy. Europe confronts Trump's triple threat on Ukraine, NATO and Trade. Dutch premier resigns after far-right leader Wilders quits government. South Korea's leftwinger Lee Jae-Myung wins presidential election. Some European auto supplier plants shut down after China's rare earth curbs. Musk calls Trump's tax-cut and spending bill 'a disgusting abomination.' Trump says China's Xi is 'extremely hard to make a deal with.' Toronto home prices halt as buyers start showing interest. German & Norwegian officials urge Canada to join 'familiar family' in buying new submarines. Wildfire-hit areas in Manitoba and Saskatchewan are not expected to get much rain.

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In currency markets. Currency markets are mostly sidelined as markets await the USD ADP jobs report and remain uncertain about US tariffs. CNY and Asian currencies are flat on average against the USD. Trading currencies are mostly sidelined, with JPY easing 0.3%, CHF falling 0.15%, SEK flat, MXN, KWD, NZD, AUD, NOK, ZAR and CZK up 0.15% against the USD.

In commodity markets. Oil, Wheat, and Soybean prices firmed by 0.35%. Natural Gas prices weakened by 0.95%. Gold & Silver prices rose by 0.2%, and Copper prices strengthened by 0.95%.

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CAD holds steady above 1.3700, ahead of today's Bank of Canada interest rate decision. The BoC is widely expected to keep interest rates at 2.75% today as policymakers await stronger growth signals. Domestically, concerns are growing for the steel and aluminum producers as US tariffs increase to 50%. PM Carney says the tariffs are both unlawful and unjustified and that Canada is intensively negotiating with the US to have tariffs removed under a new economic and security deal. At the same time, wildfires burning in Canada's oil-producing provinces have affected more than 344k (or 7%) barrels of oil sands crude oil output, according to Reuters. Intraday, investors will be monitoring the BoC Monetary Policy Statement and BoC Press Conference for signals of policy direction on interest rates into the second half of 2025.

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EURCAD is flat as investors prepare for today's BoC interest rate decision and Thursday's ECB interest rate decision.

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EUR stalls below 1.1400 with investors sidelined ahead of US Jobs data and ECB rate decision on Thursday. The euro is stalled in early trading amid caution ahead of today's ADP report after Tuesday's stronger-than-expected JOLTS Jobs opening, potentially setting the stage for Friday's critical US NFP report. Markets expect the ECB will cut its key deposit rate by 25% to 2%, according to all 81 economists in a Reuters poll. We anticipate investors will continue to be cautious ahead of the July 9th US trade deadline, after Trump's steel & aluminum tariffs were raised to 50%, taking effect today. Intraday, US Jobs and Fed speech will help drive direction for the single currency today.

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GBPEUR is sidelined with the absence of key UK economic data releases and caution ahead of the ECB rate decision.

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GBP holds above 1.3500 as the UK avoids new steel and aluminum tariffs, and awaits US economic data. The pound treads water heading into today's US jobs data and a flurry of Fed speakers. Domestically, mixed comments from Bank of England officials during the testimony before the UK Treasury Select Committee took the shine off the pound as investors look for clarity on the BoE's direction. On a positive note, the White House singled out the UK, keeping steel and aluminum tariffs at 25%, while the US increased tariffs to 50% for the rest of the world. Intraday US ADP, PMI and Fed comments will help drive market direction.