The Morning Update

The USD firms, oil prices weaken, equity markets are down, and US yields are mixed as risk sentiment wanes on signs of slower growth. The USD & US yields are steady after weakening on Monday's disappointing ISM Manufacturing PMI data. Equity markets come under selling pressure led by a tumble in energy stocks, and oil prices continue to weaken, with Brent Crude down for a 5th day. Investors are concerned about the health of the US economy after factory orders shrank in May, suggesting the manufacturing side of the economy appears to have stalled. Elsewhere, The Indian NIFTY 50 dropped 8%, set for their worst day in four years and erasing their gains for 2024. Brent crude weakened below $73, down nearly 2% today; gold dropped almost 1%; silver prices tumbled 3% below $30, and Bitcoin dropped by 0.7%, falling below $69k. Today's focus is the US Factory Orders and Jolts Job Opening, which will help provide intraday direction to currency markets.

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In other news. Modi is on course for India's election win with a weakened mandate. Biden set to tighten US immigration with limit on asylum seekers. Netanyahu's coalition slides into infighting over ceasefire plan. NYSE fixed an issue that showed 99% drops, triggering trading halts. TD bribery woes spread to Florida as new allegations surface. Intel unveils new AI chip as it seeks to reclaim market share from Nvidia and AMD. Jeep expects to grow plug-in hybrid SUV sales by as much as 50% in 2024. Eighty years on, UK D-Day veterans set sail for Normandy once again.

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In currency markets. The USD steadies after tumbling on Monday on weak ISM Manufacturing data. Indian Rupee weakens as early election results spur investing selling. South African Rand continues under selling pressure on expectations of the ANC looking to strike a coalition deal. MXN tumbles on fears of a ruling party coalition super-majority in Congress. JPY strengthened on intervention speculation. CNY is flat, while Asian currencies slip 0.2% on average vs USD. Trading currencies are mixed, with MXN, NOK & INR tumbling 1.5%, AUD & SEK weakening 0.8%, NZD falling 0.45%, IDR flat, CHF gaining 0.2%, and JPY rallying 0.7% vs USD.

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In commodity markets. Oil & Copper prices weakened by 2.2%, Natural Gas prices are flat, Gold prices fell by 0.8%, Silver prices tumbled by 2.7%, Wheat prices are up 0.2%, and Soybean prices are flat.

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CAD comes under selling pressure on a combination of weakening commodity prices and expectations that the Bank of Canada could cut domestic rates at tomorrow's BOC Interest Rate Decision. In a client note on Friday, RBC said, "Evidence has continued to build that the current high level of interest rates is no longer needed." If the BoC cuts the interest rate, it will be the first cut since March 2020, when the Covid pandemic saw the bank take interest rates to zero. Intraday, ongoing weakness in commodity prices is expected to keep the loonie on the back foot ahead of the BoC rate decision tomorrow.

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EURCAD tests a fresh six-month low with weakening commodity prices and expectations that the BoC will cut its domestic interest rates several times in 2024.

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EUR eases from its 3-month high as the USD bounces off Monday's lows. Euro tested a fresh three-month high of 1.0915 in early trading but quickly retraced towards 1.0850 as the USD recovered after Monday's disappointing manufacturing data. Domestically, German unemployment increased to 25k from an expected 10k level, while at the same time, Spanish employment levels improved more than expected. We anticipate investors will remain cautious ahead of Thursday's ECB interest rate decision and Friday's key US Nonfarm payroll number. Intraday, we expect the Euro to stay within its current trading range.

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GBPEUR holds steady with the lack of key domestic data releases and ahead of Thursday's ECB interest rate decision.

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GBP returns Monday's gains against the USD and retraces to 1.2750. The pound tested its strongest level since mid-March, testing 1.2817, but failed to extend gains as the USD rebounded and risk-off sentiment returned. Domestically, with no key UK data releases, investors continue to monitor election campaigning ahead of the July 4th election date. With no high-tier UK data releases this week, the pound will be directed by EU & US data to provide intraday direction, with the key focus being on the ECB rate decision on Thursday and Friday's US Nonfarm payroll number.

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