Daily Currency Update

USD - US Dollar

This morning, the US dollar is mixed against major currencies to start the day. Yesterday, was a consolidation of trade for the USD due to the US Juneteenth holiday, resulting in very little movement among major currencies. Today, traders may maintain a relatively cautious approach as they anticipate Chairman Powell's upcoming appearances before House and Senate panels, which should provide further insights into the US monetary policy outlook. Technical patterns suggest that the mild USD rebound observed since late last week may be losing momentum, while the overall trend of the USD index on the charts remains negative. Global stocks are adopting a defensive stance, and major bond markets are demonstrating varied performance, with US Treasuries underperforming. Soft stocks and marginally more supportive spreads may help backstop USD softness on the day.

CAD - Canadian Dollar

In quiet trading, the Canadian dollar (CAD) is performing relatively better compared to other commodity-related currencies and remains in the middle range among major currencies for the day. Stocks have seen a modest decrease during this session, while crude oil prices have shown a slight improvement. China's commercial banks have reduced their 1-year and 5-year prime lending rates by 10 basis points (bps) earlier today, following the PBoC's lead in reducing its 1-year rate. However, the anticipated larger drop in the 5-year rate has not materialized, leading to some disappointment in commodity markets regarding China's stimulus efforts. The CAD is expected to continue trading within a tight range as investors await comments from Chairman Powell and tomorrow's Canadian Retail Sales data. Observe the USD/CAD trends.

EUR - Euro

The euro (EUR) is showing modestly better performance, with ECB policymakers emphasizing the debate on interest rates, which captures the attention of the markets. ECB Governor Rehn mentioned that although prices were decelerating, they were not declining at the desired pace, while core inflation was experiencing a gradual decrease. The ECB places significant emphasis on stable core prices. The market prices reflect a hawkish tone in communication, suggesting the expectation of an additional 50 basis points (bps) of interest rate hikes by autumn.

GBP - British Pound

The British pound (Sterling) is displaying a moderate decline in performance during the overnight session as market participants seek to minimize their exposure in anticipation of significant event risks in the UK this week. Tomorrow, the UK will release CPI data for May, and it is expected to show a solid month-on-month increase in the headline rate of inflation, with little change expected in the core rate, which stood at 6.8% year-on-year in April. This data will set the stage for a Bank of England (BoE) interest rate hike on Thursday. The market consensus is for a 25 basis points (bps) increase, although slightly more (28bps) is already factored into market pricing.