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The Swiss franc and Japanese yen enjoyed safe-haven flows for the most part of the session on lingering market jitters on trade tensions and Brexit uncertainties.

  • U.S. initial jobless claims dip from 223K to 222K
  • U.S. IBD/TIPP Economic Optimism Index up from 53.6 to 53.9 vs. 54.2 estimate
  • U.S. consumer credit fell from $12.3B to $9.3B vs. $13.9B forecast
  • BOC Financial Stability Review: Policy measures improve resilience to household debt and housing imbalances
  • BOC Governor Poloz: Seeing solid economic growth in Canada
  • Poloz: Trade uncertainty is number one risk in policy time frame
  • Poloz: Higher metal tariffs to be included in July MPR forecast

Major Events/Reports:

BOC Financial Stability Review

BOC Governor Poloz and his team of policymakers were much more solid than the Cavs in Game 3 as they agreed that monetary policy is helping improve the resilience of the financial system.

In their Financial Stability Review, BOC officials noted that the vulnerability to high household debt is easing while housing market imbalances are leveling off as prices have declined in Toronto.

During the presser that followed, Poloz stated:

“The two main vulnerabilities we have been watching closely are showing continued signs of easing, which is encouraging. Combined, the impact of higher interest rates and the changes to the mortgage guidelines have reduced credit growth and improved the quality of new lending.”

In response to questions regarding a trade war with the U.S., Poloz mentioned that the higher tariffs will be included in the July MPR forecasts and that these uncertainties are the top risk in their policy time frame.

Nonetheless, analysts noted that the upbeat assessment was enough to raise the probability of a July rate hike to 78.5%.

More tweets from Trump

It looks like the Donald is getting antsy waiting for the G7 party to start and his fingers haven’t been idle.

To his credit, his tweets related to his meeting with Japanese Prime Minister Abe have been positive, as he cited how both countries are working hard to reduce the trade imbalance.

When it came to Canada, however, Trump wasn’t feeling very friendly as he typed:

To add to this sentiment, U.S. Commerce Secretary Ross even noted that Canada and France are to blame for getting higher tariffs on metal imports.

Canadian PM Trudeau, on the other hand, stayed diplomatic in saying that they will continue to be polite but firm with the U.S. in defending industries hit by higher metal tariffs.

Risk appetite retreats

Drama ahead of the G7 meetings dampened most traders’ appetite for risk, spurring demand for lower-yielding currencies. U.S. equity indices were mixed:

  • Dow 30 index is up 95.02 points to 25,241.41 (+0.38%)
  • Nasdaq is down to 7,635.07 (-0.70%)
  • S&P 500 index is down to 2,770.37 (-0.07%)

U.S. bond yields edged lower as investors flocked back to Treasuries:

  • 5-year yield is down 4.6 basis points to 2.763%
  • 10-year yield is down 4.9 basis points to 2.922%
  • 30-year yield is down 5.3 basis points to 3.068%

Gold also ticked higher on the flight to safety while crude oil managed to catch some gains despite that. This pickup was attributed to the ongoing crisis in Venezuela.

Major Market Mover(s):

CHF

The Swiss franc flexed its lower-yielding muscles and took advantage of the risk-on moves while traders had little demand for the dollar.

USD/CHF slipped from .9828 to a low of .9788, EUR/CHF fell to 1.1574, AUD/CHF tumbled from the .7500 area to a low of .7456, and NZD/CHF is down from .6923 to a low of .6878.

JPY

The yen also grabbed its share of safe-haven flows as weaker U.S. bond yields weighed on its rival.

USD/JPY is down from 110.02 to a low of 104.97, EUR/JPY slipped to a low of 129.29, GBP/JPY turned from the 148.00 mark to a low of 146.92, and AUD/JPY is down to 83.66.

Watch Out For:

  • 11:50 pm GMT: Japanese current account balance
  • 11:50 pm GMT: Japan’s final Q1 GDP (upgrade from -0.2% to -0.1% expected)
  • Tentative: Chinese trade balance (wider surplus of 238B CNY eyed)
  • 5:00 am GMT: Japanese Economy Watchers Sentiment index