Daily Currency Update

USD - US Dollar

The USD is firm but consolidating ahead of Wednesday's US CPI data and FOMC policy decision. Core majors are narrowly moving against the USD, with most showing losses under 0.2%. Weak Asian stocks have impacted FX, and the soft equity market tone has spread to Europe, with US equity futures also weaker. A hawkish Fed may be needed for the USD to sustain gains, though two rate cuts this year are possible. The NFIB Small Business Optimism Index rose to 90.5 in May, the highest this year, despite the high-for-longer US interest rates outlook. With no major US data reports today, narrow, consolidative range trading is expected to persist.

CAD - Canadian Dollar

The CAD held steady yesterday as USD gains stalled in the upper 1.37s, where it remained overnight. Weak stocks and wider spreads are dragging on the CAD. With spot trading slightly below the estimated fair value of 1.3812, near-term CAD gains are limited, with a heightened risk of retesting the April high near 1.3850. Observe the USD/CAD trend.  

EUR - Euro

Polls show the far-right National Rally at 34% support ahead of the June 30th vote. President Macron’s party is at 19%, and left-leaning groups have 22% support. Without a clear majority for National Rally, a "grand coalition" might emerge to prevent far-right control. Currently, market uncertainty is keeping French assets defensive and weighing on the EUR.

GBP - British Pound

Sterling made slight gains against a firm USD after mixed UK data. April Average Weekly Earnings rose 5.9% Y/Y, exceeding expectations, with March data also revised to 5.9%. Ex-bonus pay held at 6.0%, below the 6.1% forecast. Softer employment data might let policymakers focus on slowing labor markets and ease rates later this year.