Daily Currency Update

USD - US Dollar

The USD is experiencing an upward trend for the fourth consecutive trading session, but the progress is modest, and the overall consolidative nature of the USD's gains since Friday's low remains unchanged. Currently, the USD is stronger but slightly below yesterday's highest point. The CAD is performing relatively better, benefiting from the broader gains of the USD. The markets seem to be in a holding pattern, awaiting developments expected later in the day. Asian stocks saw a slight decline, while European stocks showed a small improvement. US futures have a slight downward trend. Major bond markets have weakened somewhat, influenced by underperforming Gilts due to disappointing inflation data. Crude oil and commodities, in general, have seen a slight decline throughout the day. The primary focus of the market today is Federal Reserve Chairman Powell's semi-annual congressional testimony before a House panel at 10ET. Considering that only a week has passed since the Federal Open Market Committee (FOMC), it is unlikely that the Fed Chair will provide significantly different information from what was heard last week. However, the market will certainly pay attention to any hints Powell drops regarding the future interest rate outlook. Chicago Fed President Goolsbee, who is known for his dovish stance, will also speak at 12.25ET. Currently, there is limited potential for further gains in the USD as investors evaluate the prospects of US rate policies.

CAD - Canadian Dollar

The CAD is holding steady around the low 1.32 range before the release of Canadian Retail Sales at 8.30ET. Market consensus predicts a 0.4% month-on-month gain in April, following a weak report in March. This forecast surpasses the 0.2% advance estimate for April, which was released alongside the March report. The summary of the Bank of Canada's discussions during their June 7th policy decision will be of interest due to the unexpected tightening measures implemented this month. The report could provide insights into policymakers' concerns regarding inflation and give an indication of potential future tightening. Positive data and a hawkish tone in the Bank's summary would boost the CAD. Observe the USD/CAD trends.

EUR - Euro

The market's belief that the ECB policy will reach its peak at 4% and the resulting support for the EUR are being reinforced by hawkish comments from the ECB. For the first time since March, market projections are factoring in a terminal rate of 4% by October. ECB Governor Kazimir emphasized the importance of cooling core inflation before considering a pause in rates, highlighting policymakers' strong emphasis on persistent core inflation as a significant factor behind the recent shift towards a more hawkish approach by the ECB in recent weeks.

GBP - British Pound

Once again, the UK CPI data has delivered disappointing results, surpassing expectations. In May, the headline CPI increased by 0.7% during the month (compared to an expected 0.5%), and the annual inflation rate accelerated to 8.7%. Core CPI also rose to 7.1% annually, and the 3-month annualized core rate remained above 12%, highlighting the significant surge in core prices since the beginning of the year. This data is likely to solidify a 25 basis points hike from the Bank of England (BoE) tomorrow, with markets indicating a slightly higher probability of a 50 basis points increase. Following the release of the data, the GBP experienced a decline of nearly one cent against the USD, indicating the necessity for a more aggressive level of rate support.