Billionaire Battle: Trump vs. Musk Rocks Market Sentiment

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.3560-1.3790

Euro                 1.5520-1.5750

Sterling            1.8430-1.8660

WTI Oil (opening level) $63.30

The CAD/USD is opening at 1.3686 ( 0.7307 )

The CAD is little changed against the generally stronger USD overnight.

This morning’s labour market report is expected to reflect a drop in employment and a push higher in unemployment to 7.0% -which would be the highest since late 2021. Soft results in the data may undercut the CAD to some extent and, depending on the USD reaction to Non Farm Payroll, nudge USD/CAD back to the low/mid 1.37s.

Headlines

·    Risk sentiment was pressured by a public feud between Trump and Elon Musk, which began when Musk pushed to “kill” Trump’s signature “Big Beautiful bill”. After a series of heated exchanges on Thursday with Musk calling for Trump's impeachment and Trump threatening to cut off Musk's government contracts, Musk eventually signaled a willingness to cool off and take a step back.

·    Trump announced a positive phone call with Chinese President Xi, focused mainly on trade. Their teams will meet soon at a location to be decided. The call lasted about 1.5 hours.

·    ECB cut key interest rates by 25 bps, citing updated forecasts. Inflation is close to the 2% target, projected at 2.0% in 2025, 1.6% in 2026, and 2.0% in 2027. The suggestion by ECB president Lagarde that the ECB is nearing the end of its rate cutting cycle saw short European rates jump higher as the market priced less easing from the ECB into the forward curve, as the market now sees higher odds of a July pause and that the next rate cut may be the last.

·    US initial jobless claims rose by 8,000 to 247,000 in the week ending May 31, exceeding expectations of 235,000 and marking the highest level since October 2024, hinting at labour market softening.

·    The US Treasury Department, in its first semiannual report on US trading partner’s currency practices since Trump’s inauguration, did not label any country a “currency manipulator”, although China was cited for its “lack of transparency”. The report warned that the treasury would be more vigilant on currency polices in the future, with Treasury Secretary Scott Bessent saying that “We will continue to strengthen our analysis of currency practices and increase the consequences of any manipulation designation.” 

Key Points

·    Equities: Trump-Musk feud hits Tesla; ECB cuts rates; investors await US payrolls

·    Volatility: VIX rebounds to 18.5; short-term hedging rises ahead of data

·    Digital assets: BTC, ETH dip; IBIT sees outflow; network activity stays strong

·    Fixed Income: European rates rise on ECB guidance

·    Currencies: EUR rally post-ECB fizzles, USD mostly sideways ahead of jobs data.

·    Commodities: Strong week across energy and metals with silver hitting a 13-year high

·    Macro events: US Nonfarm Payrolls & Unemployment Rate