The Morning Update

The USD is steady, oil prices are down, equity markets are down, and US yields ease ahead of central bank speakers today. Currency markets are sidelined ahead of a flurry of Fed, ECB & BOE policymaker's speeches today. Equity markets consolidated ahead of Nvidia Corp earnings on Wednesday. Nvidia is up 90% in 2024 and has been the bellwether for AI tech, powering a large part of the S&P 500's recent earnings. Elsewhere, the Bloomberg Commodity Spot Index reached its highest level since January 2023, with Gold, Silver, and Copper slipping from record highs. Crypto prices gained on signs of momentum toward US approval of ETF investing directly in the second-largest token, Ether. Equities weakened in China after seven days of gains as data showed little improvement in China's property sector, with local governments earning the least revenue since 2016 through land sales. In focus today, CAD BoC CPI, BoE Governor Bailey, and US Fed's Barken, Waller, Williams, Barr, Bostic, Collins & Mester speeches will help provide intraday direction to currency markets.

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In other news. The ICC arrest warrants move sparks fierce reaction from Israel and the White House. Jacob Zuma is banned from running in the South African election. The death of Iran's President Raisi will test the unity of Iran's hardline fractions. Treasury Secretary Yellen urges Europe to join the US in a crackdown on Chinese exports and boost compliance with US sanctions on Russia. UK regulator plans crackdowns on Mastercard and Visa merchant fees. UK grocery inflation falls to 'more normal levels'. Sector data shows. The federal government is launching its 'national action plan' to combat auto thefts in Canada.

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In currency markets. China's yuan hits its weakest level in 3-weeks following a daily fix set at a 3-month low. Japan continues to monitor the weak yen and bond market closely. AUD & NZD stall on the prospect of steady interest rates. The USD is sidelined ahead of a flurry of Fed speakers today. CNY is constant, while Asian currencies are firm at 0.1% on average compared to USD. Trading currencies are mixed, with IDR slipping by 0.15%, while AUD & NZD are flat, JPY & CHF firmed by 0.1%, SEK & ZAR gained 0.3%, NOK strengthened by 0.5% vs USD.

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In Commodity markets. Oil prices weakened by 0.9%, Natural Gas prices are flat, Gold fell by 0.8%, Silver prices tumbled by 2%, Copper prices slipped by 0.5%, Wheat prices eased by 0.6%, and Soybean prices dropped by 1%.

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CAD slips in early trading as markets and commodity prices ease, and investors focus on the CAD inflation report. Stats Canada will release its April consumer price index report, which is expected to fall to 2.7%, down from 2.9% in April. The Bank of Canada has signaled it is moving closer to cutting interest rates, but it wants to see the downward momentum in inflation sustained for longer. The next BoC interest rate decision will be on June 5th, but financial markets expect the bank to hold interest rates steady until July.

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EURCAD continues to edge higher, testing a fresh five-month high as commodity prices ease and the prospect of CAD inflation levels is expected to ease.

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EUR holds above 1.0850 despite increasing risk-off sentiment. Investors are sidelined by the absence of fresh eurozone economic data, and markets remain cautious ahead of a slew of Fed speakers today. Since the release of the US April inflation report, Fed policymakers have taken a cautious tone on the timing of a pivot in US interest rates. We anticipate the Euro will hold below 1.0900 ahead of the Fed comments today and the FOMC minutes on Wednesday.

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GBPEUR holds steady at seven-week highs after positive IMF comments and caution ahead of BoE Governor Bailey's remarks today.

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GBP holds near two-month highs heading into the BoE & Fed speeches today. Domestically, UK grocery inflation falls to 'more normal levels', to 2.4% in the four weeks to mid-May, down from 3.2%. The IMF said the UK economy is set for a soft landing. "With growth recovering faster than expected, the UK economy is approaching a soft landing, following a mild technical recession in 2023. CPI inflation has fallen faster than was envisaged last year and is projected to return durably to target in early 2025." Intraday comments from BoE Bailey and Fed policy markets will drive direction to currency markets.