The USD has lost some of its gains from yesterday in early trading. Stocks declined in Asian markets and stabilized in Europe, but US equity futures are weaker, maintaining the cautious sentiment in risk assets observed since last week's significant US market sell-off. Risk appetite remains subdued and may continue to influence FX in the near term. Today's US data releases include the second estimate of Q1 GDP (with a small downward revision expected), weekly jobless claims, and pending home sales. Additionally, the Fed's Williams (voter) and Logan (non-voter) are scheduled to speak.
The CAD is holding steady around 1.37. Sentiment is impacted by rising US yields, softer commodities, and recent equity market trends. Investors are cautious ahead of the BoC policy decision on June 5th, with swaps pricing indicating uncertainty about a potential rate cut (16bps priced in). Currently, the CAD is slightly off its estimated fair value of 1.3621. Despite firmer US term rates recently, the narrowing US/Canada yield spreads, especially the 2Y spread, should be supporting the CAD more. Observe the USD/CAD trend.
Eurozone Economic Confidence improved in April, and the unemployment rate fell to 6.4%, slightly better than expected. A 25bps cut at the June 6th ECB policy decision is almost fully priced in, but future easing may be approached cautiously. Low unemployment could fuel concerns about wages and price pressures among policy hawks. EUR/USD briefly dipped below 1.08 overnight, but dips seem attractive to bargain hunters.
Sterling is steady after rebounding from a drop to the upper 1.26s overnight. No major UK data was reported. The first opinion poll since PM Sunak called the snap election for July 4th shows little change, with Labour holding a substantial lead. After a weak start to the Conservatives' campaign, the election seems Labour's to lose. Investors appear comfortable with the likelihood of a clear Labour victory.
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