The Morning Update

The US$ steadies, oil prices edge higher, equity markets are down, while US yields are mixed on global economic concerns. The Paris-based OECD warns that the world economy is set for a weak recovery from shocks of Covid, the ongoing war in Ukraine, persistent high inflation levels and the continuing restrictive policies of major central banks seeking to contain price pressures. The OECD forecast a 2.7% expansion of world output in 2023, and a modest pickup to 2.9% in 2024, both below the 3.4% average in the 7 years before the covid pandemic. The US, Eurozone & China will see the same sluggishness in their recoveries, with inflation remaining stronger than the period before 2019. China's exports plunged by 7.5% in May, far more than expected, with signs of fading momentum in the worlds 2nd largest economy weighing on risk-sentiment globally. Today focus will be on US Goods & Services Trade Balance, Consumer Credit Change. CAD BoC Interest Rate Decision, BoC Rate Statement, International Merchandise Trade will help provide intraday direction to currency markets.

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In other news. US Secretary of State Blinken to visit China this month in a sign of easing tensions. Households flee war-torn Ukraine towns as dam floods spread-FT. OECD chief economist calls for governments to cut fiscal support. The Arctic will have ice-free summers as soon as 2030's, sooner than leading climate scientists had predicted, new research finds. The Greek economy unexpectedly shrank which could further weigh on the wider Eurozone's data after Germany suffered a recession. China rate-cut expectations grow as signs of weak recovery mount-Bloomberg. EU considers mandatory ban on using Huawei to build 5G-FT. UK PM Sunak makes his first official visit to Washington today.

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In currency markets. The US$ comes under pressure as market expectations grow that the Fed will pause in June. The AUD hits 3-week highs after the RBA rate hike. CAD hits 4-week highs ahead of the BoC rate decision. Euro & CNY are sidelined after weakening economic concerns. CNY is flat, while Asian currencies are up 0.1% on average vs US$. Trading currencies advance with NZD, MXN & CHF are up 0.1%, JPY & AUD firm 0.25%, SEK gains 0.35%, while NOK strengthens 0.55% & ZAR rallies 0.7% vs US$.

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Oil prices steady markets balance economic slowdown concerns vs increasing summer travel demand. C$ advances to fresh monthly highs vs US$ as speculation increases that the Bank of Canada would resume its tightening campaign potentially as soon as today or in the coming months. Domestically the Canadian economy remains under pressure with building permit value falling 18.8% in April, and the Ivey PMI showed that economic activity expanded at the slowest pace in 3-months. We anticipate the BoC will keep rates on hold, but the BoC statement will key for signs of future BoC rate direction in 2023.

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EURCAD continues under pressure falling to fresh 3-month lows, falling 1.3% in June as expectations grow that BoC may hike interest rates as soon as today.

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EUR continues to straddle 1.0700 amid an increasing cautious mood. The Euro is benefiting from a weaker US$ while weakening industrial output Germany and weakening economic growth in Greek will likely cap Euro's ability to strengthen beyond 1.0800. The ECB remains hawkish on interest rate hikes, ahead of next weeks interest rate decision. The increasing shift to risk-aversion is expected to support the US$ ahead of next weeks ECB meeting, while intraday US Goods Trade Balance & Consumer Credit Change for help will help provide some intraday direction to currency markets today.

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GBPEUR inches higher, retesting 2023 highs as the Eurozone continues to struggle with economic growth.

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GBP retests 1.2450 despite increasing risk aversion and ongoing UK economic concerns. The pound edges higher after data today showed the first annual drop in UK house prices in 11-years as rising mortgage costs start to impact on buyers. The BoE will convene on June 22nd with traders anticipating an 88% chance of a 25bps rate hike, this will be the Banks 12th hike since 2021. Investors will be focused on UK jobs data on the 13th and UK Inflation data on the 21st with both data releases anticipated to help steer the BoE's next likely move. Intraday US economic data releases with help provide intraday direction for the pound.

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