Crypto Erases Positive Start to the Week

Bitcoin plunged to $27K, losing more than 2.7% since the start of the day and erasing all of Sunday’s gains. Technically, the selling intensified after the pair failed to break above the 50-day moving average, which turned from support to resistance in May. Market participants should now brace for another test of local support around $26K.

USDCNH Heads for 7.3 per Dollar to Support the Economy

The official services and manufacturing PMIs were much weaker than expected, adding to the move into defensive assets on concerns over China’s economy.

Canadian Dollar Edges Lower ahead of Canadian GDP

The Canadian dollar is trading close to a two-month low, as the currency remains under pressure. USD/CAD is trading at 1.3646 in the European session, up 0.34%.

Better-than-Expected European Data Failed to Stop Euro's Decline

However, the Eurozone’s data is not so bad today. The number of unemployed in Germany rose by 9K, down from 23K and 19K in the previous two months. Unemployment is rising much more slowly than in the recessions of 2009 and 2010, and the unemployment rate (5.6%) is low by historical standards.

Canada's GDP Rebounds in First Quarter of 2023 

The Canadian economy expanded by 3.1% quarter/quarter annualized (q/q) in 2023 Q1. Furthermore, the flash estimate for April showed a 0.2% month-on-month increase.

Sunset Market Commentary

Core bonds extended this week’s gains during European trading hours as the data drum echoed yesterday’s sound. Additionally, risk sentiment soured following dismal Chinese figures this morning. French inflation fell by 0.1% M/M in May (vs 0.3% consensus) with the Y/Y-figure come down from 6.9% to 6% (vs 6.4% expected).

Deal on the US Debt Ceiling

The House of Representatives passed the deal between President Biden and the Republicans on the debt ceiling yesterday and thus averting a default on US Treasuries. The bill now goes to the Senate where it is also expected to be passed. This signals the end to debt ceiling uncertainty for now.

Fed to Hop?

And this is not the case for now. Even though, the Fed funds futures are back pricing in the possibility of no rate hike in June as the base case scenario, noises from the Fed members hint that a pause to rate hikes in June wouldn’t necessarily mean that there won’t be another 25bp increase by the end of July.

Crypto: Correction in Progress

Bitcoin closed the month down 7.6% at $27.0K, having gained every month since the beginning of the year. With further declines, the momentum towards the $25.5-26.0 area is worth a closer look. There is a 50-week average near the lower boundary, while at the top, bitcoin found support on May’s declines.

ECB Set to Continue the Fight Against Inflation Despite Weakening

Eurostat’s preliminary estimate showed a decline in annual inflation in May to 6.1% from 7.0% in April. Economists had forecasted a smaller decrease to 6.3% y/y. Core inflation, which excludes volatile energy and food prices, also slowed down from 5.6% to 5.3%, confirming a downward trend.