US DOLLAR
The US Dollar is trading mostly flat against the major currencies with the British Pound as the worst G10 performer today. Investors seem to avoid heavy directional bets ahead of July Fourth holiday and the release of key employment data (Friday). There is also a call for caution ahead of possible tit-for-tat tariffs retaliation from the EU. The US Administration announced that they are applying additional taxes to a new list of EU products. The economic calendar remains light and thin market liquidity is expected to drive the markets.
CANADIAN DOLLAR
USD/CAD is trading in tight ranges and remains near an eight-month low as investors seek clear direction. June Manufacturing PMI was up 49.2 in June, picking up 41-month low of 49.1. The Index remains under key 50.0 mark, and the survey revealed declining volume of new work contributed to the sharpest drop in production for three and half years. We expect firmer oil prices to be CAD supportive in the absence of major economic releases.
EURO
EUR/USD continues to trade around the 1.13 handle, hardly excited by better-than-expected June PMI. The index rose to 52.2, up from 51.8 from the previous month, signalling some pick-up in economic growth. Production sector, however, remains under contraction, falling for the fifth consecutive month. The musical chair for the next ECB President seems to come to an end and market expects Christine Lagarde to follow the same cautious/dovish path as Chief Draghi.
BRITISH POUND
The Sterling is the worst performer among the G10 currencies this morning, under pressure from poor PMI and dovish comments from the Bank of England. The UK Services Index clocked 50.2 in June, with services sector stagnating. GBP also took an another hit after Governor Carney pointed out that the British economy is set for a rocky phase with global trade war and a No Deal Brexit becoming “growing possibilities”.
JAPANESE YEN
Dollar-yen closed the gap and is now trading in negative territory as investors switch to risk-off mode. US threat to impose new tariffs on EU imports renews concerns of slowdown in global economy growth. With market closing early and moving into July 4th holiday mode, we expect the pair to trade within tight ranges.
