RBC Capital Markets

Day ahead: The ECB meets today (see EUR). Data wise, in the US, existing home sales, weekly jobless claims, and the Chicago Fed national activity index are out. Other releases include UK’s GfK consumer confidence, Japan’s CPI, and Euro area consumer confidence. The two-day White House virtual climate summit starts today. President Xi who is attending, is expected to make an announcement on China’s emission target.

CAD: Yesterday’s “hawkish taper” by the BoC brought USD/CAD right back to the lows of the past month’s range. Technically our analyst argued it triggered a bearish outside day (closing below short-term support at 1.2502 in the process). Fundamentally, it reinforced our view that the BoC is relatively sanguine on CAD strength, to the extent that it is justified by strength in the Canadian economy and crude. We have heard several question how far ahead of the Fed the BoC can realistically move

Citi

Asia has seen markets trade in a quiet fashion following Wednesday’s rebound in risk sentiment. Despite lacklustre price action, there were a few talking points including the surprisingly hawkish CAD BoC decision overnight, which comes ahead of the EUR ECB meeting today.

We don’t expect major fireworks today from the ECB with June much more likely to generate sustained market moves. EURUSD has struggled to hold onto recent gains as the ECB has increased the pace of PEPP for another week whilst on the flow side we’ve seen US corporates step in and sell into the recent rally.

Should we however see a rally then we expect further selling pressure from US names to cap moves towards 1.2075/1.21. On the downside 1.20 continues to offer support but should Lagarde keep the door open to further stimulus then 1.20 looks vulnerable, opening up the 1.1970/1.20 breakout area.

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