The Morning Update

The USD weakens, oil prices remain steady, equity markets are mixed, and US yields rise as the focus shifts to US-China trade talks. The USD Index weakens in early trading as upbeat sentiment from Friday's US NFP report gave way to caution ahead of the key US-China trade talks, which will be held in London today. Asian equities and US futures firmed ahead of today's US and China trade talks, while European equities fell in early trading. Alongside the US/China trade talks, investors will also focus on Wednesday's May US inflation report. Markets expect an increase in US inflation levels as companies gradually pass higher import duties to consumers. Elsewhere, oil prices slip on weaker-than-expected Chinese PPI and trade data, Bitcoin dips to $106.2k, and silver prices extend gains to 13-year highs. In focus this week, Monday sees no high-tier data releases. Tuesday, UK Employment Change and EU Sentix Investor Confidence. Wednesday, the US CPI report, and the Monthly Budget Statement. Thursday, UK Industrial & Manufacturing Production, US PPI, and a flurry of ECB policymakers' speeches. Friday, German Inflation report, EU Industrial Production. The US Michigan Consumer Sentiment Index will help drive direction in currency markets.

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In the news. China and US trade officials will hold talks in London. China's exports to the US clocked their sharpest drop in more than 5 years, down over 34% in May. Norway's oil fund calls for urgent reform of European capital markets. Federal agents clash with anti-deportation protesters in LA. A Colombian opposition senator was shot in Bogota. Israeli forces seize Gaza aid boat carrying Greta Thunberg. Senate Republicans plan to release major revisions to Trump's tax bill. DHL Express locks out workers across Canada, adding to parcel sector turmoil. Carney is set to make a defence announcement in Toronto as NATO eyes a spending boost.

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In currency markets. The AUD & NZD rallied in early trading, driven by optimism over US-China trade talks in London. The USD Index eases in early trading, while EUR & GBP extend gains as markets focus on US/China trade talks, and remain cautious ahead of Wednesday's critical US inflation report. CNY firms 0.1%, while Asian currencies firmed 0.3% against the USD. Trading currencies improved, with CHF & CHF flat, MXN, ZAR, KWD, DKK, CZK & NOK firmed 0.25%, JPY gained 0.5%, AUD strengthened 0.7%, and NZD rallied 0.8% against the USD.

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In commodity markets. Oil, Copper & Soybean prices are flat. Natural Gas prices tumbled 2.2%. Gold prices eased 0.2%. Silver prices strengthened by 0.9%, and Lumber prices slipped by 0.3%.

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CAD holds steady below 1.3700 with the lack of any high-tier economic data releases, and as markets remain cautious ahead of updates from the US/China trade talks. Domestically, on Friday, data showed Canada's economy added 8,800 jobs in April, compared to an expected decline of 12.500. The unemployment rate climbed to 7%, its highest level in almost 9 years, excluding the peak of the COVID-19 pandemic. With the lack of any high-tier economic data released from Canada this week, the focus will be on the G7 Leaders' Summit, held in Alberta from June 15-17, with hopes of progress with US/Canada trade when Trump/Carney meet.

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EURCAD advances through 1.5600 as the euro benefits heading into the US/China trade talks, while the loonie holds steady with ongoing US/CAD trade uncertainties.

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EUR advances through 1.1400 amid increasing optimism for the US/China trade talks. The euro extends gains against a softening USD as investors remain cautious ahead of the widely anticipated US-China trade talks and hawkish ECB comments. ECB President Lagarde said that they have a long way to go until inflation is squeezed out of the economy and added that rates will have to remain restrictive for as long as necessary to ensure price stability on a lasting basis. Focus will be on the US/China trade meeting, followed by Wednesday's key US inflation report to help provide direction for the euro.

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GBPEUR edges higher as markets shift focus to the UK employment reports.

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GBP advances against a softening USD. The pound advances amid a softening USD ahead of today's US/China trade talks. With the lack of any high-tier economic data releases today, investors have shifted their focus to Tuesday's UK Claimant count change and ILO Unemployment rate, which is expected to rise to 4.6%. Intraday, we expect the pound to hold steady ahead of any updates from the Sino/US trade talks.