Spreadex Market Update

Better Data Drives USD Higher, BOC Rate Decision Today



USD buying continues on Wednesday following better data yesterday, ISM manufacturing up next today. CHF rallies as SNB says will decide on inflation at upcoming meeting. Eurozone reports record inflation in May, Lagarde due to speak today. BOC expected to hike rates by 50bps, forward guidance on watch. Oil prices reverse initial rally in response to EU-Russia oil ban.
Key Factors for Today
- USD firmer on better data
- Eurozone records record inflation in May
- Equities recover following yesterday’s losses
- CHF rallies on hawkish SNB expectations
- Oil reverses yesterday’s gains
- BOC rate decision due today
Coming Up
- EUR Eurozone PMIs
- USD US ISM manufacturing
- CAD BOC Rate decision
US Dollar Rallies on Better Data, ISM Manufacturing Due Today
The US Dollar is seeing continued buying at the European open on Wednesday. Yesterday
saw a batch of positive data prints for the US with the Chicago PMI rising to 60.3 from 56.4
and CB consumer confidence beating expectations at 106.4 vs 103.9 forecast. Today,
investor attention will be on the ISM manufacturing PMI, which is expected to have fallen
back last month, as well as comments from Fed’s Williams and Bullard. In particular,
investors will be looking to see whether Williams and Bullard stick to the core hawkish view
from the Fed or echo recent dovish comments from George and Bostic.
Better Start for Equities
European equities markets have seen a better start to today’s session following some pull
back into month-end yesterday. The surge in oil prices, as well as record inflation in the
eurozone, fuelled yesterday’s bearishness. Today’s slew of eurozone PMI data releases
might see this bearishness kick in again if further weakness is seen in these readings. US
markets are a little more stable today while Asian equities are trading firmly higher on China reopening optimism.
CHF Leading FX on Hawkish SNB Expectations
In FX, JPY has been the weakest currency over late Asian and early European trading on
Wednesday. With the BOJ reaffirming its easing stance once again at the start of the week,
JPY has remained under pressure since. CHF is leading the way today as rate hike
expectations rise on the back of comments from the SNB’s vice-chairman yesterday
regarding the presence of inflation in the Swiss economy.
BOC Rate Decision Due Today, Lagarde Speaks Also Following Record Eurozone Inflation
Main data event for FX today will be the BOC June rate decision. The BOC is widely expected
to hike rates by a further 50bps, with traders looking to see how hawkish the forward
guidance is. A clear signal that further hikes are likely should keep CAD well bid near-term.
We also have ECB’s Lagarde on deck and traders will be looking to see if there has been an
increase in hawkishness on the back of yesterday’s record eurozone inflation print of 8.1%
vs 7.8% forecast.
Metals Markets Remain Lifeless
Gold and silver prices have diverged a little today with gold negative on the European
session so far while silver is still in the green. Better demand in USD this week has weighed
on gold prices while the broadly positive tone to equities has also had a limiting effect on
the metals complex.
Oil Reverses Yesterday’s Gains, EIA Delayed Until Tomorrow
Oil prices have started Wednesday’s trading in a positive tone following a sharp reversal of
yesterday’s knee-jerk move higher in response to news of the EU ban on Russian oil. With
Russia vowing to recoup the lost custom elsewhere, some of the supply concerns have
ebbed. Nevertheless, the risks for oil prices are clearly skewed to the upside in the near
term. Weekly EIA report comes a day late this week following Memorial Day holiday in US.

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