USDCAD consolidates ahead of BoC hike

The Canadian dollar pulled back as the market underpriced the possibility of a rate hike. However, recent economic data have left the door open for the BoC to lift interest rates at the upcoming meeting. Canada’s economy picked up steam in May after stalling in April, and a resurgence in the housing market combined with tightness in the job market is likely to keep the central bank on its hawkish pathway in an attempt to make inflation return to the 2% target. Another 0.25% hike along with an assertive forward guide could play in the loonie’s favour. The pair is testing a former support at 1.3400 with 1.3120 as a fresh support.

NZDUSD awaits RBNZ rate decision

The New Zealand dollar drifts lower as a shallow recession puts rate hikes in doubt. Growth slipped into negative territory in Q4 2022 and Q1 2023, well below the central bank’s forecast, and more contraction in economic activity is expected in the second half of the year as previous steep rate hikes come into full effect. The market hopes that officials would leave the OCR unchanged at 5.50% in the face of a downturn. But the RBNZ’s determination to hit the brakes hard cannot be underestimated. An upside surprise would be another incremental hike, potentially sending the kiwi towards 0.6380 with 0.6000 as a key support.

XAUUSD falls as rates keep climbing

Gold pulls back on the prospect of high interest rates for longer. Strength in the US labour market alleviates concerns about a recession but fans fear that higher interest rates could become the new normal for the foreseeable future. With another 25-basis-point hike from the Fed this month and the yield on 10-year Treasury notes on the rise, the non-yielding metal seems to have little to offer. However, geopolitical risks may swing the market mood again as brewing trade tensions between China and the US could trigger a flight-to-safety. Then gold may shine once again and climb above 1980 with 1900 as the closest support.

NAS 100 slows down over US-China trade worries

The Nasdaq 100 drifts sideways over the risk of escalation in the US-China trade dispute. As investors expect another rate increase at the next Fed meeting later this month and the tightening campaign to draw to an end soon, they might have shifted their attention eastward. Tensions between Beijing and Washington over access to high-tech chips could spill over market sentiment amid an AI race. China’s response to the US export curbs by restricting metals that the semiconductor industry rely on could take a toll on a largely AI-driven tech rally. The index is hovering under 15700 and 14300 is the immediate support.

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