The USD slips, oil prices are up, equity markets are mixed, and US yields ease with the focus on remaining inflation. The USD slips for a 3rd day, equity markets are mixed as investors remain cautious, and US yields dip ahead of the consumer confidence today, eurozone CPI Wednesday, and Friday's US PCE, the Fed's favorite measure of underlying inflation. Fed's Kashkari told CNBC that he wants 'many more months' of positive inflation data before a rate cut and said the Fed could potentially even hike rates if inflation fails to come down further. Investors expect the eurozone to head lower in April, Japan's inflation levels are expected to rise to 1.8% from 1.3%, while the US PCE is expected to show a modest relief. Elsewhere, Gold & Oil prices rise; Bitcoin prices slip, while Silver prices rally 4%. In focus today, the US Housing Price Index, Consumer Confidence, CAD Raw Material Price Index & CAD Industrial Product Price will help provide intraday direction to currency markets.
In other news. Spain, Ireland, and Norway are set to recognize Palestine statehood. Belgium pledges 30 F16 fighter jets to Ukraine. Macron & Scholze, we must strengthen European sovereignty. The Philippines urges the US and its Allies to boost inward investment to counter China. Apple's iPhone sales in China jumped 52% in April. Papua New Guinea orders evacuations after landslides, thousands feared buried. Lagging Canadian banks hold out hope for rate cuts. Tanks reach Rafah's center as Israel presses assault. UK's Sunak proposes tax cuts for pensioners in new election pledge. Toyota showcases compact engines that are adaptable to different fuels.
In currency markets. The USD drops for a 3rd day, with the index heading for its first monthly drop in 2024. Chinese Yuan remains under pressure, while Asian currency managed to edge higher on the back of the softer USD. CNY slips 0.1%, while Asian currencies are up 0.15% on average vs. USD. Trading currencies are mixed, with ZAR weakening by 0.25%, IDR & MXN slipping 0.15%, JPY & NOK flat, AUD up by 0.1%, NZD firms by 0.2%, and SEK rallying 0.55% vs. USD.
In commodity markets. Oil, Copper & Wheat prices strengthened by 1.5%, Natural Gas prices eased by 0.35%, Gold prices firmed by 0.5%, Silver prices rallied by 4%, and Soybean prices slipped by 0.15%.
CAD continues to extend gains amid a softer USD, with the loonie rebounding 1%, heading towards May highs of 1.3600. Domestically, the focus is growing on the BoC's June 5th interest rate decision as analysts have increased the chances of a June interest cut to 65%. Canadian investors will focus on Thursday's CAD Current Account and Friday's GDP to help guide the BoC's interest rate decision next week. Today's focus is US Consumer Confidence and lower tier CAD Industrial product price and raw material price index to help provide intraday direction to the loonie.
EURCAD rebounds, nearing 5-month highs, with the Euro up nearly 1% in May as investors anticipate BoC will cut interest rates on June 5th and expectations CAD could cut more aggressively in 2024 as its domestic economy remains under pressure.
EUR extends to a third day of strengthening, extending gains towards 1.0900. The euro continues to benefit from a softer US despite easing eurozone inflation expectations and continuing investor caution. The hawkish comments from Fed Kashkari, who said he wanted more data on inflation, indicated that he wasn't ruling out the possibility that the Fed could still hike rates further, which failed to impact the USD. Investors will focus on the US Consumer Confidence index in May and more Fed talk to help provide intraday direction.
GBPEUR slips off near 3-month highs as investors remain cautious of the Eurozone inflation report and uncertainty ahead of the UK July election.
GBP stalls below 1.2800 ahead of key inflation reports to end a positive trading month for the pound. The pound stalls after testing its strongest level today since mid-March as the USD remains soft. We feel that the pound can potentially extend gains towards 1.2850 ahead of Friday's key US PCE report, finding support from the prospect that the BoE won't cut domestic interest rates heading into the UK election. Intraday Fed speech and US consumer confidence data will help guide the pound today.
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