The Morning Update

The USD eases, oil prices weaken, equity markets are mixed, and US yields ease as high yields sour the risk-on mood. Currency markets are steady ahead of today's US GDP data. European equity markets are mixed, US futures extend declines, and US yields are near their highest levels of 2024 on increasing concerns that the Fed will keep rates higher for longer. Global equity markets are headed for their worst week since mid-April as expectations of a US rate cut ahead of Q4 faded as US inflation levels remain sticky. Elsewhere, OJ frozen concentrate closed at another record high of $4.77 per pound. Oil prices weaken heading into US stockpile data and the OPEC+ meeting on the weekend. Gold prices ease, Silver & Copper prices tumble, and Bitcoin edges higher through $67,500. In focus today, CAD Current Account, US GDP, Initial Jobless Claims, Pending Home Sales, and more Fed speak from Fed's Williams & Logan will help provide intraday direction to currency markets.

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In other news. Salesforce shares plunged 16% on its first revenue miss since 2006. China weighs record fine for PwC over Evergrande audit work. Brookfield confirms it's in talks to buy France's Neoen at a $6.6 billion valuation. NATO has just 5% of the air defense needed to protect its eastern flank. Poland moves to reinforce borders with Belarus & Russia, while Czech ammunition supplier CSG warns of poor quality of parts sourced for Ukraine. Early South African election results put the ANC on course to lose its majority. Israel expects the Gaza war against Hamas to last for seven more months. Tesla is preparing to register its FSD autonomous driving feature in China.

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In currency markets. The South African Rand tumbles on early election results. China's yuan edges off six-month lows. Commodity currencies remain under pressure from a surge in US bond yields, souring risk appetites.CNY firmed 0.2%, while Asian currencies are flat on average against the USD. Trading currencies are mixed with ZAR tumbling 1.1%, MXN & IDR weakening 0.6%, NZD down 0.1%, AUD flat, NOK & SEK firming 0.3%, JPY strengthening 0.4%, CHF rallying 0.7% vs USD.

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In commodity markets. Oil & Gold prices weakened by 0.4%, Natural Gas prices fell by 0.9%, Silver & Copper prices tumbled by 2.3%, Wheat prices dropped by 1.7%, and Soybean prices were flat.

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CAD extends its weakening trend on weakening commodity prices alongside the rise of global bond yields, which has soured investors' risk sentiment. We anticipate CAD investors will remain on the sidelines ahead of Friday's CAD GDP, which could provide clues on the timing of an expected BoC interest rate cut. Markets expect a 60% chance of a BoC rate cut on June 5th. Intraday US GDP will be the primary driver for direction for the loonie today.

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EURCAD continues to drive higher, up nearly 1% in May and approaching a five-month high as markets increasingly expect the BoC to cut rates multiple times in 2024, while the ECB may be limited to just one cut.

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EUR rebounds from early losses, trading back through 1.0800 ahead of US GDP data. The euro bounced off two-week lows as the USD softened in early trading as markets consolidated ahead of the US GDP report. Domestically, Italian employment improved to 6.9% from an expected 7.2%. EU Business climate improved, while consumer & service confidence held steady, and industrial confidence came in slightly below forecast. The US GDP is expected to be 1.3% annually, down from 1.6%.

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GBPEUR eases in early trading, off its three-month highs as the Euro data comes in with expectations and unemployment in Italy improves, highlighting sticky inflation concerns.

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GBP edges above 1.2700 as the USD pulls back as risk sentiment improves. The pound remains cautious ahead of the US GDP report and speeches from Fed policymakers who have maintained their hawkish tones. With the absence of domestic high-tier economic data releases, the pound relies on US data to drive intraday direction for the pound. The pound has fallen over 1/2% after hitting its highest monthly levels on Wednesday as increasing signs of sticky US inflation levels are increasingly expected that the Fed will keep its rates on hold through 2024.