Spreadex Market Update
Risk Assets Surge as Inflation Cools Down, Gold and Euro Shine
The big news
The financial markets experienced a significant shift on the last trading day before the US and Canada holidays. Investors' sentiment was bolstered by the May PCE deflator, which showed inflation cooling down to its slowest pace in two years. The 0.1% monthly and 3.8% annual figures were in line with expectations but lower than April's readings. This disinflationary trend sent the dollar tumbling, while gold, a traditional safe-haven asset, saw a boost, rising 0.62% to $1920/oz.
The Euro also had a moment of resurgence, with EUR/USD regaining the $1.09 mark. The June Flash CPI for the Euro Area came in at 5.5%, in line with expectations and unchanged from the previous month. However, the core rate of inflation accelerated to 5.4%, surpassing May's 5.3%, albeit falling short of the 5.5% forecast. This mixed inflation data drove the Euro's strength against the dollar, with EUR/USD closing 0.42% higher and eyeing $1.0960 as long as bulls maintain control above $1.0863.
In Canada, the April monthly GDP remained flat, below the expected 0.2% growth, signalling an economic slowdown. Moreover, the Bank of Canada's Q2 business outlook survey presented a pessimistic picture, with the indicator dropping to -2.2 from the previous -1.1. The Canadian dollar experienced some volatility, closing lower against the USD, as it oscillated between $1.3285 and $1.3200.
Meanwhile, China's Caixin Manufacturing PMI held steady at 50.5, beating expectations of a decline. Though slightly lower than the previous month's reading, the figure still indicated expansion in the sector. Notably, consumer new orders showed positive growth, contributing to the optimistic outlook. These positive signs supported WTI crude oil in reclaiming the $70/bbl threshold, with the next resistance level at $71.70/bbl.
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