The Morning Update

The USD slips, oil prices firm, equity markets are mixed, and US yields rise ahead of US key data. Currency markets are sidelined, equity markets saw Asian markets fall, and European markets are mixed ahead of today's key GDP and Friday's crucial Core PCE price index reports. Investors are focused on today's GDP report, which is expected to rise to 1.4% in Q1 annually, while the initial jobless claims are expected to hold steady at 236k. The primary focus will be Friday's Core PCE price index, expected to hold steady at 2.6%. Fed Governor Bowman said yesterday she sees several upside risks to the inflation outlook and commented that "we are still not yet at the point where it is appropriate to lower the policy rate. Elsewhere, oil prices cautiously strengthened, Bitcoin firmed above $61k, Gold firmed after two days of declines, and Ion Ore extended gains on optimism that Chinese demand will pick up. In focus today, US GDP, Initial Jobless Claims, Pending Home Sales, and Durable Goods Orders will help provide intraday direction to currency markets.

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In other news. French far-right leader Jordan Bardella vows 'cultural battle' and demands EU rebate. Levi's shares drop 15% as jeans maker's sales disappoint despite the denim craze. TD says deep rate cuts will revive Canada's economic growth. Japan issues fresh warnings against sharp JPY falls. China's industrial profits rose slower in May amid a patchy recovery. Bolivia's coup attempt failed after a military assault on the presidential palace. Trump and Biden's first presidential debate of 2024 is today on CNN.

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In currency markets. The Japanese yen has hit its weakest level against the USD since 1986, reigniting intervention speculation. Chinese yuan slips to 7-month low on PBOC's repeated soft guidance. The Philippine peso makes modest gains after its central bank keeps interest rates on hold. ZAR weakens as the focus remains on an upcoming cabinet announcement. CNY is flat, while Asian currencies firm by 0.15% against the USD. Trading currencies are primarily positive, with ZAR tumbling 0.95%, SEK slipping 0.15%, CHF flat, JPY, NOK & MXN up 0.2%, and AUD & NZD gaining 0.35% against the USD.

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In commodity markets. Oil prices firmed by 0.55%, Natural Gas prices are flat, Gold, Wheat, & Soybean prices firmed by 0.4%, silver prices slipped by 0.2%, and Copper prices weakened by 0.5%.

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CAD prices are steady, holding below 1.3700, heading into the US GDP and jobs data today. Domestically, Canada's economy is projected to grow at just 0.9% in 2024, well below the estimated 2.3% projected in the US, according to a Bloomberg survey of economists. TD economists expect the BoC to cut its policy rate to 2.25% by the start of 2026. Investors will likely remain on the sidelines ahead of Friday's CAD GDP and the US crucial US Core Personal Consumption Expenditures price index, which will help guide the Fed & BoC for future interest rate cuts.

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EURCAD remains under pressure, holding near eight-week lows as uncertainty in the French election keeps pressure on the Euro heading into France's Sunday election.

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EUR continues to pivot at 1.0700 as investors remain cautious heading into Friday's key US inflation report and Sunday's French election. The Euro remains capped at 1.0700 amid the EU political uncertainty following the far-right success in the EU elections. Domestically, EU consumer confidence held steady, while the Economic sentiment indicator slipped below expectations. We anticipate the Euro will remain on the back foot heading into France's election on Sunday. A loss for Macron to Le Penn could see the Euro come under further short-term weakness.

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GBPEUR holds just below two-year highs as pressure remains on the Euro heading into the French election.

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GBP edges higher amid a softer USD, but investors remain cautious with expectations of higher US rates for longer. The pound edges back to 1.2650, but investors remain cautious with increasing expectations that the Fed will keep domestic interest rates on hold until the end of 2024. Domestically, the political uncertainty is keeping some pressure on the pound ahead of the July 4th UK election. The UK BoE Financial Stability Report commented that the UK financial system is broadly unchanged from Q1. Still, some asset prices have continued to rise, and the risk of a sharp correction persists. Intraday will focus on the US Jobs & GDP, which will help provide intraday direction to the pound.