The strongest to weakest of the major currencies

The AUD is the strongest and the USD is the weakest at the North American session begins. The major currencies are relatively scrunched together and price action has been up and down (or down and up) for many pairs. The USD was higher earlier, especially vs the EUR and GBP with prices of the EURUSD and the GBPUSD declining in the Asian session. However, each has seen a rebound and are trading to new session highs as NA traders enter for the day. Each is also extending above hourly MAs indicative of a more bullish technical bias.

Looking at the EURUSD it is extending above the near converged 100/200 hour MAs at the 1.0214 area. The earlier low could not extend below the low from yesterday and sellers turned to buyers pushing the pair higher toward the moving average levels (see the chart below).

EURUSD bouncing higher

Overnight, Chinese trade data for May reveals a contraction in exports by 7.5% compared to the same period last year, pointing to weakened overseas demand for locally produced goods. This decline follows three consecutive months of export growth as Chinese manufacturers rushed to fill pending orders after COVID-19 restrictions were eased. Additionally, imports experienced a 4.5% drop, albeit at a slower pace than in April. Surprisingly, China's trade surplus reached a one-year low in May at 452B (vs 676B est and 618B last month), signaling challenges in the post-pandemic recovery for the world's second-largest economy. These figures underscore the sluggishness in China's trade sector and highlight the impact of subdued global demand on the country's export-oriented economy.The People’s Bank of China set the reference rate for onshore yuan at its weakest (for CNY, highest for USD/CNY) since December 1 last year. The PBOC’s persistent affirming of the slide for the yuan is a form of stimulus for the country's export sector. The data supports that.

Also in the Asian Pacific session, Australian economic growth data for the first quarter of 2023 a day after the surprise 25 bp hike indicated a lower-than-expected GDP growth of 0.2% quarter-on-quarter, missing the already modest estimates of 0.3%. On a year-on-year basis, the growth stood at 2.3%, below the expected 2.4% and the previous quarter's 2.7%. The data reveals little indication of diminishing price pressures, as the GDP implicit price deflator rose by 1.9% in the March quarter and 6.8% compared to the same period last year. The components of growth show that domestic final demand and capital investment were the primary contributors, while consumption expenditure by households and the government was subdued. Net trade had a negative impact, and changes in inventories did not contribute to growth. The household saving ratio decreased, reaching its lowest level since June 2008, and productivity also declined (inflationary).

The Organization for Economic Co-operation and Development (OECD) marginally upgraded its global growth outlook for 2023, citing lower energy prices and improving sentiment. Despite the positive forecast, headwinds remain, including tighter monetary policy and geopolitical tensions. U.S. stock futures dipped slightly, awaiting the Federal Reserve's upcoming interest rate decision. The problem is that decision is not until next Wednesday. US CPI will be released on Tuesday next week ahead of the rate decision.

Oil prices experienced volatility in trading today as traders reacted to weaker-than-expected Chinese trade data, dampening hopes for increased oil demand from the world's largest oil importer. Nevertheless, prices are higher in early US trading. Helping on the positive side is industry data released late yesterday indicating a larger-than-anticipated drawdown in crude inventories with crude showing a -1.710M drawdown vs an expected build of 1M. Gasoline saw a build of 2.417M vs +0.9M estimate as the summer driving season begins.

Bank of Canada rate decision will be released at 10 AM with expectations of unchanged but with a tilt for a hike still in play. Canada and US trade data will be released at 8:30 AM. Crude oil inventories for the current week will be released at 10:30 AM and US consumer credit at 3 PM.

A snapshot of the markets currently shows:

  • Crude oil is up $0.71 at $72.45 after trading as low $71.01 overnight.
  • Spot gold is trading down marginally by $-2.35 at $1960.91
  • Silver is nearly unchanged at $23.57
  • Bitcoin is higher at $26,857 despite trouble with the SEC for Binance and Coinbase - two large crypto exchanges. On Tuesday, the Securities and Exchange Commission sued Coinbase over operating an unlicensed exchange. The dip yesterday added to steep losses seen on Monday that were sparked by similar charges brought by the SEC against rival Binance, but prices have nevertheless rebounded from lows near $25,350.

In the premarket for US stocks, the major indices are now trading marginally higher:

  • Dow Industrial Average is trading up 27 points after yesterday's 10.42-point rise
  • S&P index is trading up 6 points after yesterday's 10.08-point rise
  • NASDAQ index is trading up 28 points after yesterday's 46.99-point rise

In the European equity markets, the major indices are also mostly higher. The exceptions are Spain which is up a strong 0.94%, and Italy which is down -0.3%

  • German DAX +0.09%
  • Frances CAC +0.11%
  • UK's FTSE 100 +0.14%
  • Spain's Ibex +0.94%
  • Italy's FTSE MIB -0.3%

In the Asian Pacific market today stock indices were mixed:

  • Japan's Nikkei came off of all-time highs on Tuesday and fell-1.82%
  • Hang Seng index rose 0.80%
  • Shanghai composite index rose 0.08%
  • Australia's S&P/ASX 200 index fell -0.16%

In the US debt market yields are mixed/little changed

  • 2 year yield 4.533% +0.8 basis points
  • 5 year yield 3.861% +0.6 basis points
  • 10 year yield 3.700% unchanged
  • 30 year yield 3.867% -0.7 basis points

In the European debt market, benchmark 10 year yields are mixed:

European benchmark 10 year yields