The US$ steadies, oil prices firm, equity markets and US yields are up as China eases covid restrictions. China cut its quarantine time in half for new arrivals to 7 days, easing investor concerns about global growth. China’s central bank pledged to keep monetary policy supportive to help the nation’s economy. In Europe, ECB President Lagarde plays down recession risks, says ECB is ready to ‘move faster’ on rates if needed. Markets responded positively with equity and oil prices gaining, the US$ & treasuries stabilized, and commodity-linked currencies strengthened. Intraday US Housing Price Index & US Consumer confidence will help provide direction to markets. In other news. The G7 to explore caps on energy prices to curb Russian revenues (FT). Russia admits responsibility for the Ukrainian shopping mall attack. Tokyo June heatwave worst since 1875 as power supply creaks under strain (Reuters). Leaders arrive at the NATO summit that could determine the next phase of war in Ukraine. The UK’s Northern Ireland trade law clears first parliamentary hurdle. German consumer sentiment plunges to a new record low (GfK institute). Iran nuclear talks to resume this week in Qatar. The currency markets. The US$ Index rebounds from intraday lows, Euro stalls below 1.0600 as ECB President sticks to script, and GBP holds steady, In Asia, Indian INR tests record lows, JPY retests 136.00 while CNY steady’s vs US$. CNY firms 0.1% while Asian currencies are flat on average vs US$. Trading currencies are mixed with MXN dips 0.1%, NZD & ZAR are down 0.2%, JPY weakens 0.35%, while NOK & CHF is up 0.2% and AUD strengthens 0.35% vs US$.
Oil prices extend gains after China cuts its quarantine time for travelers, Saudi Arabia & UAE struggle to boost output significantly and political unrest in Libya and Ecuador added to supply concerns. C$ advances to a fresh 12-day high as oil prices continue to rally, China’s reduction in covid restrictions and a generally easing US$. CAD economic docket is empty this week and will rely on Oil prices and US economic releases for intraday direction. Heading into the Canadian and US long weekend we may see some profit taking emerge, buying US$ on dips below 1.28. Support resets to 1.2771 resistance lowers to 1.2890.
Euro holds below 1.0600 as ECB Lagarde sticks to her script on the economy and interest rate hikes. ECB President said the ECB upcoming bond-buying program will curb borrowing costs for vulnerable euro-zone countries while keeping up pressure on their governments to repair their budgets. Lagarde went on to play down recession fears and suggested a ¼% hike in July and ½% hike in September is still on track. Bias remains to sell Euro on any rallies vs US$. Support holds at 1.0525 while remains at 1.0625.
EURGBP strengthens 1.35% in June, with Euro remaining in its technical up-channel targeting a retest of .8750 as economic and political headwinds keeps pressure on the GBP. Support rises to .8560 (1.1682) while resistance resets to .8660 (1.1547).
GBP consolidates below 1.2300 but remains vulnerable to further weakness. GBP stalls despite improving risk-on sentiment as political uncertainties, stalled Brexit talks and slumping economic growth continues to keep the GBP under pressure. In a 295 to 221 in favour of a bill that would unilaterally overturn part of the UK’s divorce deal from the EU in 2020. The BoE is expected to opt for a more gradual approach towards raising interest rates amid growing recession fears adding further pressure to the GBP. Support holds at 1.2225 while resistance lowers to 1.2315.