The USD is steady, oil prices firmed, equity markets are up, and US yields are mixed on the Sino/US plan and caution ahead of the US inflation report. Currency markets are holding steady ahead of today's key US inflation report. JPMorgan lifted its end-of-year forecast for China's onshore yuan spot price on Wednesday, citing moderating risks around the US trade war and a broader global theme of de-dollarization (Reuters). Global equities rally, while US futures ease, leaving the S&P 500 poised to snap a three-day winning streak following two days of US/China talks that ended with thinly detailed outcomes. After two days of negotiations in London, US officials said both sides had established a framework to revive the flow of sensitive goods, even though the plan still needs to be signed off by Trump and Xi Jinping. Elsewhere, oil prices gain while markets assess the US-China trade talks and rising OPEC+ supply, Bitcoin eases, and gold prices firm in early trading. The focus today will be on the US CPI, which is forecast to increase by 0.2% in May and advance by 2.5% year over year. The US CPI is expected to rise moderately in May due to relatively cheaper gas; however, import tariffs are likely to start filtering through to other goods, raising underlying inflation pressure.
In the news: The US and China agree to a framework deal to restore the trade war truce. The ECB says gold will overtake the euro as the global reserve asset. LA mayor imposes curfew in a push to quell protests. World's oceans remain near record temperatures as CO2 levels rise. China's rare earths magnets maker says it has received export licenses. Northern Irish rioters attack police, torch houses for a second night. Stocks and the dollar cautiously welcome the latest US-China trade detente. Canada's economy in 'suspended animation' during trade war, CIBC chief says. Europe's fastest-growing nuclear fusion company raises $148 million in record funding round.
In currency markets. The USD index holds steady, cautiously welcoming the latest US-China trade detente. JPY continues under pressure as investors remain cautious on the tariff impact in the June economic report. Currency markets remain sidelined ahead of today's key US inflation report. CNY & Asian currencies on average are flat against the USD. Trading currencies are mixed, with ZAR & NZD weakening 0.3%, SEK, JPY, NOK, and AUD easing 0.2%, CHF, KWD & DKK flat, and MXN firmed by 0.15% against the USD.
In commodity markets. Oil, Soybean & Wheat prices firmed by 0.1%. Natural Gas prices rallied by 0.9%. Gold prices strengthened by 0.4%. Silver prices weakened by 0.6% and copper prices tumbled by 2%.
CAD edges higher, trading through 1.3700, finding support from optimism for the US/China trade talks ahead of the G7 talks in Alberta starting Thursday. We remain cautious for the Loonie as it continues to face headwinds from increasing OPEC oil output, set for its 3rd straight rise in July and the ongoing US/Canada trade dispute. Intraday investors will be focused on the US inflation report to help provide intraday guidance to the loonie.
EURCAD holds steady with investors sidelined ahead of today's US inflation report.
EUR continues to be capped at 1.1450 as focus shifts to the US CPI report. The euro holds onto gains, as the USD pares gains following easing trade tensions between the US and China. Investors remain cautious heading into the high-impact US CPI inflation report, while EBC President Lagarde commented that the euro has room to become the dollar's alternative. Intraday, comments from ECB's Cipollone and the US Consumer Price Index will drive direction for the euro today.
GBPEUR is sidelined as investors look for fresh direction from the UK GDP and a flurry of ECB speakers on Thursday.
GBP stalls below 1.3500 ahead of the US inflation release. Following yesterday's disappointing UK employment report, the pound remains on the back foot, after we saw a rise in new claimants and the unemployment rate. The weaker-than-expected jobs report has increased expectations that the Bank of England will ease rates in Q3 and Q4 to take rates down to 3.75% by the end of 2025. Intraday will focus on the US inflation report to help drive direction for the pound.
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