The Morning Update

The USD edges higher, oil prices firm, equity markets are mixed, while US yields slip on US data. The USD & European equities improve after robust US data soothes recession jitters, while investors await more commentary from central banks at the ECB forum for further policy direction. US equity futures are under pressure after the report of new curbs on AI chip sales to China. Signs of economic stress in China are keeping markets in limbo waiting for the possibility of stimulus measures after China's industrial profits tumble, deepening economic gloom. Today sees a light US economic docket so the focus will be on Fed Powell, ECB Lagarde, BoE Bailey & BoJ Ueda with all of them speaking at the ECB forum.

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In other news. UBS preparing to cut over half of the Credit Suisse workforce. Putin steps up an effort to undercut Wagner's leader after the revolt. Ukraine says 'main event' in counteroffensive still to come. Unrest erupts in Paris suburbs after police shoot dead teen driver. Wagner's future in Africa is in question after the Russian mutiny. The last Brexit deal? Gibraltar fears a hard border with Spain-FT. Tesla to hit record quarterly sales in China even as market share shrinks.

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In currency news. JPY is expected to remain under pressure with its ultra-low interest rate policy. AUD hits 3-week lows after a sharp slowdown in inflation, NZD slumps after NZ central bank says its interest rates have peaked. Currency markets remain subdued by continuing bleak Chinese data. CNY weakens 0.35%, while Asian currencies are down 0.2% on average vs US$. Trading currencies are under pressure with NZD tumbling 1.1%, AUD weakening 0.7%, ZAR falling 0.5%, and SEK & CHF slipping 0.25%. JPY & NOK are flat while outlier MXN gains 0.2% vs US$.

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Oil prices improve after US inventory drop offsets rate hike fears. C$ continues to weaken against the USD after Tuesday's domestic data showed inflation levels eased at their slowest pace in two years to 3.4% in May. Markets still see a 60% chance of a rate hike by the BoC at its next policy decision on July 12th, down from 65% before Tuesday's inflation data. Today the economic docket is light so the focus will be on the ECB Forum where several key central bank leaders will be speaking on a panel this morning.

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EURCAD edges higher testing a fresh high and wiping out all of the CAD gains in June after CAD inflation levels cool and the ECB continues its hawkish rhetoric.

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EUR consolidates near June highs at 1.0950 ahead of ECB & FED comments today. Euro continues to find support from ongoing ECB rhetoric while further gains face growing concerns of a weakening Chinese economy. Today the currency is struggling for direction as investors await speeches from Fed Chair Powell and ECB Lagarde for fresh guidance on interest rates. On Tuesday ECB Lagarde's hawkish remarks provided an underlying support to the Euro, as she confirmed the ECB's willingness to continue to tighten the interest rate policy. Today all focus will be on the 9.30 (EST) panel with the ECB, FED, BOJ & BOE heads will be speaking.

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GBPEUR continues to weaken as markets focus on EBC rate hikes, while recession fears in the UK continue to keep pressure on the GBP.

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GBP extends losses towards 1.2700 on a firmer USD, weakening Chinese data and ahead of BOE Bailey's speech. The pound continues to slip off its 15-month highs vs US$ as risk-on sentiment eases on a slowing China economy and expectations the UK economy will slip into recession as the BoE continues to tackle persistently high inflation levels. Later today, BoE Bailey will be speaking at a policy panel at the ECB Forum where markets will be looking for further direction on the bank's direction on future interest rate hikes.

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