Canada's Inflation Steady at 1.7% for May, Below BoC Target Again

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

US Dollar        1.3620-1.3860

Euro                 1.5810-1.6060

Sterling            1.8560-1.8800

WTI Oil (opening level) $64.86

The CAD/USD is opening at 1.3710 ( 0.7294 )

Canada's annual inflation rate held steady at 1.7% in May 2025, aligning with market expectations and remaining below the Bank of Canada's 2% target for the second month after removing the federal consumer carbon tax.

Headlines

·    Israel and Iran seemed to be complying with a US-brokered ceasefire agreement after Trump’s firm response to reports of initial breaches by both parties.

·    Powell said inflation could come in weaker than expected, which would support an earlier rate cut. However, if inflation or labor market strength persists, that could delay any rate cuts.

·    According to the South China Morning Post, China’s president Xi Jinping will not attend the Brics summit in Rio de Janeiro, the first time the Chinese leader has skipped a Brics summit, and will send Premier Li Qiang instead. The reason cited by sources is that Xi has already met Brazil’s president Lula twice within the last year.

·    Australia’s inflation cooled faster than anticipated in May, after the CPI rose just 2.1% YoY, and below consensus of 2.3%, thereby moving close to the bottom of the Reserve Bank’s 2-3% target, reinforcing expectations the RBA will cut rates next month.

·    The US current account deficit grew by 44.3% to $450.2 billion in Q1 2025, surpassing expectations of $443.3 billion. The goods deficit rose to $466 billion as imports increased by $158.2 billion to $1 trillion, led by nonmonetary gold and consumer goods, primarily medicinal, dental, and pharmaceutical products.

Key Points

·    Equities: Ceasefire lifts global stocks, tech outperforms, energy weak, airlines surge

·    Volatility: VIX drops to 17.5, volatility back to normal, insurance cheaper

·    Digital assets: Bitcoin steady, IBIT/ETHA rally, crypto stocks surge, stablecoin news

·    Fixed Income: US treasury yields drop as Fed Chair Powell testifies before House committee

·    Currencies: The US dollar was sharply weaker yesterday, but stabilized overnight. AUD weak on soft CPI

·    Commodities: Crude’s geopolitical risk premium evaporates. Platinum back on top