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The Bank of Canada today maintained its target for the overnight rate at 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70%.

Since the April Monetary Policy Report, the US administration has continued to increase and decrease various tariffs. China and the United States have stepped back from extremely high tariffs and bilateral trade negotiations have begun with a number of countries. However, the outcomes of these negotiations are highly uncertain, tariff rates are well above their levels at the beginning of 2025, and new trade actions are still being threatened. Uncertainty remains high.

While the global economy has shown resilience in recent months, this partly reflects a temporary surge in activity to get ahead of tariffs. In the United States, domestic demand remained relatively strong but higher imports pulled down first-quarter GDP. US inflation has ticked down but remains above 2%, with the price effects of tariffs still to come. In Europe, economic growth has been supported by exports, while defence spending is set to increase.  China’s economy has slowed as the effects of past fiscal support fade. More recently, high tariffs have begun to curtail Chinese exports to the US. Since the financial market turmoil in April, risk assets have largely recovered and volatility has diminished, although markets remain sensitive to US policy announcements. Oil prices have fluctuated but remain close to their levels at the time of the April MPR.

In Canada, economic growth in the first quarter came in at 2.2%, slightly stronger than the Bank had forecast, while the composition of GDP growth was largely as expected. The pull-forward of exports to the United States and inventory accumulation boosted activity, with final domestic demand roughly flat. Strong spending on machinery and equipment held up growth in business investment by more than expected. Consumption slowed from its very strong fourth-quarter pace, but continued to grow despite a large drop in consumer confidence. Housing activity was down, driven by a sharp contraction in resales. Government spending also declined. The labour market has weakened, particularly in trade-intensive sectors, and unemployment has risen to 6.9%. The economy is expected to be considerably weaker in the second quarter, with the strength in exports and inventories reversing and final domestic demand remaining subdued.

CPI inflation eased to 1.7% in April, as the elimination of the federal consumer carbon tax reduced inflation by 0.6 percentage points. Excluding taxes, inflation rose 2.3% in April, slightly stronger than the Bank had expected. The Bank’s preferred measures of core inflation, as well as other measures of underlying inflation, moved up. Recent surveys indicate that households continue to expect that tariffs will raise prices and many businesses say they intend to pass on the costs of higher tariffs. The Bank will be watching all these indicators closely to gauge how inflationary pressures are evolving.

With uncertainty about US tariffs still high, the Canadian economy softer but not sharply weaker, and some unexpected firmness in recent inflation data, Governing Council decided to hold the policy rate as we gain more information on US trade policy and its impacts. We will continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs.

Governing Council is proceeding carefully, with particular attention to the risks and uncertainties facing the Canadian economy. These include: the extent to which higher US tariffs reduce demand for Canadian exports; how much this spills over into business investment, employment and household spending; how much and how quickly cost increases are passed on to consumer prices; and how inflation expectations evolve.

We are focused on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval. We will support economic growth while ensuring inflation remains well controlled.

Information note

The next scheduled date for announcing the overnight rate target is July 30, 2025. The Bank will publish its next MPR at the same time.

Gold price moves within a tight range on Wednesday but remains bullishly aligned following limited corrective dip on Tuesday.

Broken Fibo level at $3355 (61.8% of $3200/$3120 pullback) reverted to solid support which keeps the downside protected so far and guards lower trigger at $3328 (broken triangle’s upper boundary, reinforced by 10DMA).

Technical picture on daily chart remains bullish overall, with the action being strongly underpinned by thick daily cloud (top of the cloud currently lays at psychological $3000 level), but warnings from fading positive momentum and Stochastic entering overbought zone, should not be ignored.

Near-term bias, however, is expected to remain with bulls as long as the price stays above broken triangle resistance, with extended consolidation likely to precede fresh attacks at key $3400 resistance zone (Tuesday’s peak / psychological / Fibo 76.4%) violation of which would unmask key $3500 level (new record high).

The notion is supported by overall favorable fundamental conditions, mainly due to persisting uncertainty over the US trade tariffs, particularly on negotiations with China and EU, as well as doubled tariffs on metal imports that fuel worries about further turmoil in global trading.

US economic data were so far mixed, as two of three US May labor reports (JOLTS 7.39M vs 7.11M f/c and ADP 37K vs 111K f/c) conflicted, as the markets await release of NFP report on Friday, to get more details about the condition in the US labor sector.

Also, growing concerns about US fiscal growth on signals that enormous US debt would be boosted by recently passed spending and tax cut bills, is likely to provide fresh tailwinds to the yellow metal, along with persistently unstable and overheated geopolitical situation.

Res: 3372; 3392; 3400; 3410
Sup: 3343; 3328; 3318; 3310

Daily Pivots: (S1) 142.89; (P) 143.50; (R1) 144.62; More...

Intraday bias in USD/JPY stays neutral for the moment. On the upside, above 146.27 will target 148.64 resistance first. Firm break there will resume the rebound from 139.87. Nevertheless, break of 142.10 will bring deeper fall back to 139.87 low.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low), with fall from 158.86 as the third leg. Strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

Daily Pivots: (S1) 0.8184; (P) 0.8216; (R1) 0.8273; More….

Intraday bias in USD/CHF stays neutral at this point. Fall from 0.8475 could still extend lower, and break of 0.8156 will target 0.8038 low. But strong support should be seen from there to bring rebound, at least on first attempt. On the upside, break of 0.8346 resistance will extend the corrective pattern from 0.8038 with another rising leg.

In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress and met 61.8% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.8079 already. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.8732) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

Daily Pivots: (S1) 1.3488; (P) 1.3523; (R1) 1.3555; More...

GBP/USD is still bounded in range below 1.3592 and intraday bias remains neutral. With 1.3389 support intact, further rise is expected. On the upside, firm break of 1.3592 will resume larger up trend to 100% projection of 1.2706 to 1.3442 from 1.3138 at 1.3874. However, decisive break of 1.3389 will turn bias back to the downside for 1.3138 support instead.

In the bigger picture, up trend from 1.3051 (2022 low) is in progress. Next medium term target is 61.8% projection of 1.0351 to 1.3433 from 1.2099 at 1.4004. Outlook will now stay bullish as long as 55 W EMA (now at 1.2866) holds, even in case of deep pullback.

Daily Pivots: (S1) 1.1338; (P) 1.1397; (R1) 1.1429; More...

EUR/USD is staying in consolidations below 1.1453 temporary top and intraday bias remains neutral. Rebound from 1.1064 could extend higher, but strong resistance should be seen from 1.1572 to limit upside, at least on first attempt. On the downside, break of 1.1209 support will indicate that the corrective pattern from 1.1572 has started the third leg, and target 1.1064 support.

In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0856) holds.

Trading remains subdued as markets drift into the US session, with little conviction across asset classes. US futures dipped slightly after a dismal ADP employment report showing only 37k job additions in May, sharply below expectations. Still, the reaction was contained, with no clear evidence of a broad risk-off move.

US President Donald Trump added to the noise with another jab at Fed on Truth Social: “ADP NUMBER OUT!!! ‘Too Late’ Powell must now LOWER THE RATE.” While such commentary adds political pressure, Fed officials have consistently stated they need to remain patient given the elevated uncertainty surrounding US tariff policies and ongoing trade talks. Fed is clearly reluctant to act prematurely.

Trade remains a key driver of sentiment. The latest round of higher US tariffs on steel and aluminium took effect on Wednesday, affecting all partners except the UK, which has a preliminary agreement in place. Today also marks the Trump administration’s self-imposed deadline for trading partners to submit their “best offers” to avoid sweeping tariffs set to begin in early July. Markets are likely to see a pickup in volatility as the tariff pause approaches its final weeks.

In the currency markets, Dollar is currently the worst performer for the day so far, followed by Loonie and Yen. At the other end, Aussie is leading gains, followed by Kiwi and Swiss Franc. Euro and Pound are holding steady in the middle of the pack. Despite some movement, major currency pairs remain trapped within last week’s ranges.

USD/CAD may come into sharper focus later in the session as BoC delivers its rate decision, alongside the release of the US ISM Services report.

Technically, USD/CAD remains on the defensive and poised for further decline as long as the 1.3860 resistance level holds. 61.8% projection of 1.4414 to 1.3749 from 1.4014 at 1.3603 might provide some support to bring rebound. However, decisive break there could prompt downside acceleration to 100% projection at 1.3349 rather quickly.

In Europe, at the time of writing, FTSE is up 0.22%. DAX is up 0.39%. CAC is up 0.57%. UK 10-year yield is down -0.041 at 4.606. Germany 10-year yield is flat at 2.523. Earlier in Asia, Nikkei rose 0.80%. Hong Kong HSI rose 0.60%. China Shanghai SSE rose 0.42%. Singapore Strait Times is up 0.24%. Japan 10-year JGB yield rose 0.023 to 1.505.

US ADP jobs rise only 37k, but wages growth stays firm

The US private sector added just 37k jobs in May, sharply below expectations of 120k, according to the ADP report.

Weakness was most apparent in goods-producing sectors, which shed -2k jobs, while service providers managed a modest gain of 36k. By company size, medium-sized businesses led with 49k new jobs, while small firms lost -13k and large firms shed -3k.

Despite the hiring slowdown, wage pressures remained firm. Annual pay growth for job-stayers held steady at 4.5%, while job-changers saw a 7% increase, unchanged from April.

Nela Richardson, ADP’s chief economist, acknowledged the slowdown in hiring but noted that wage pressures have not yet eased meaningfully—suggesting lingering tightness in segments of the labor market even as overall momentum weakens.

UK PMI services finalized at 50.9, rebound as tariff concerns ease

The UK services sector returned to modest growth in May, with PMI Services finalized at 50.9, rebounding from April’s 27-month low of 49.0. Composite PMI also edged into expansion at 50.3, up from 48.5.

Tim Moore of S&P Global highlighted that easing fears over US tariffs, firmer global markets, and renewed client confidence underpinned the service sector’s recovery. Business sentiment for the year ahead climbed to a seven-month high, driven by investment plans and improved sales expectations.

However, the underlying job market remains soft. The eight-month stretch of declining employment in the sector now marks the longest non-pandemic downturn since the global financial crisis.

But encouragingly, input cost inflation eased from April’s peak, while competitive pricing pressures led to the slowest increase in service charges since October.

Eurozone PMI composite finalized at 50.2, ECB cuts and Germany to suhion tariffs impact ahead

Eurozone’s services sector contracted modestly in May, with the final PMI Services reading falling to 49.7, down from April’s 50.1, marking a six-month low. This decline pulled the Composite PMI down to 50.2, indicating only marginal overall growth in private sector activity.

The divergence in national performance was notable: Italy led with a 13-month high of 52.5, while Germany and France both remained in contraction, with Germany posting a five-month low of 48.5 and France improving to a nine-month high of 49.3.

Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, expressed confidence that expected ECB rate cuts and anticipated fiscal support from Germany would help cushion the impact of rising tariffs and growing uncertainty.

However, inflation signals from the PMI survey were mixed. Services sector sales price growth moderated again, which may reassure the ECB on the disinflation front. Still, cost pressures picked up slightly, which could complicate the ECB’s job over the longer term. Nevertheless, with goods prices easing more quickly and overall inflation slipping below target.

Australia’s GDP grows only 0.2% qoq in Q1, as weather and public investment drag

Australia’s GDP expanded just 0.2% qoq in Q1, falling short of expectations for 0.4% qoq growth. On an annual basis, GDP rose 1.3% yoy. However, GDP per capita declined by -0.2% qoq, marking a renewed contraction in individual economic output.

The ABS noted that severe weather disrupted key sectors including mining, tourism, and shipping, while also impacting domestic demand and exports.

The most notable drag came from public investment, which fell -2.0%, contributing to the largest negative impact from public spending since Q3 2017. Net exports also weighed slightly, subtracting -0.1 percentage points from quarterly growth.

Japan’s PMI composite finalized at 50.2, growth momentum falters

Japan’s private sector lost steam in May as final PMI Services reading slipped to 51.0 from April’s 52.4, while Composite PMI declined to 50.2 from 51.2. The data point to only marginal growth in overall activity, with a slowdown in services combining with a mild deterioration in manufacturing output.

S&P Global’s Annabel Fiddes noted that the rise in total new orders "moved closer to stagnation, as service sector sales grew at their slowest pace in six months and factory demand continued to decline. This moderation suggests that Japan’s private sector "may struggle to bounce back in the near-term".

Underlying concerns were linked to external and structural factors, including an uncertain global demand outlook, persistent labor shortages, and mounting cost pressures.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1338; (P) 1.1397; (R1) 1.1429; More...

EUR/USD is staying in consolidations below 1.1453 temporary top and intraday bias remains neutral. Rebound from 1.1064 could extend higher, but strong resistance should be seen from 1.1572 to limit upside, at least on first attempt. On the downside, break of 1.1209 support will indicate that the corrective pattern from 1.1572 has started the third leg, and target 1.1064 support.

In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0856) holds.

The US private sector added just 37k jobs in May, sharply below expectations of 120k, according to the ADP report.

Weakness was most apparent in goods-producing sectors, which shed -2k jobs, while service providers managed a modest gain of 36k. By company size, medium-sized businesses led with 49k new jobs, while small firms lost -13k and large firms shed -3k.

Despite the hiring slowdown, wage pressures remained firm. Annual pay growth for job-stayers held steady at 4.5%, while job-changers saw a 7% increase, unchanged from April.

Nela Richardson, ADP’s chief economist, acknowledged the slowdown in hiring but noted that wage pressures have not yet eased meaningfully—suggesting lingering tightness in segments of the labor market even as overall momentum weakens.

Full US ADP release here.

Market Picture

The market capitalisation, at $3.32 trillion, remains roughly the same as the day before. With the start of the new month, there is a visible upward trend with a sequence of higher local highs, although the market is more than 3% lower than it was seven days ago.

The cryptocurrency sentiment index remains in greed territory at 62, although it has lost a couple of points over the day. This cooling does not interfere with the local positive trend but indicates a moderate pace of growth.

Bitcoin is trading above $105K, rebounding from lows near $103K on 31 May. This looks like the beginning of an upward movement from the mid-May consolidation area. Potentially, this momentum could take the market to new highs above $130K.

Ethereum continues to struggle with its 200-day moving average, unable to consolidate above it. However, the overall positive background allows bulls to seize the initiative on downward pullbacks quickly. As was the case three and a half weeks ago, breaking through $2,700 will be an important signal that the coin has moved from consolidation to growth. In turn, this could be an important indicator of renewed optimism for the entire cryptocurrency market.

News Background

According to Cryptoquant, Bitcoin could correct to $96,700. This level corresponds to the average purchase price of short-term investors. Bitcoin Magazine is also not optimistic about Bitcoin’s short-term prospects.

Strategy has announced the issue of 2.5 million preferred shares with a 10% dividend yield. The funds raised will be used to purchase the first cryptocurrency.

Hong Kong-based Reitar Logtech Holdings intends to purchase $1.5 billion worth of Bitcoin as a hedge against volatility in traditional markets and to increase financial stability. No specific purchase dates have been announced.

Binance founder Changpeng Zhao has discussed the risks associated with the widespread creation of corporate reserves based on Bitcoin. According to him, they are ‘non-binary and range from 0 to 100.’ However, with the right balance, it is possible to achieve an optimal risk/return ratio.

The GBP/USD pair remains steady around 1.3515, maintaining its strength after reaching a three-year high on 26 May. The British pound has shown greater stability than other major currencies amid rising geopolitical and economic pressures.

Pound supported by global tensions and domestic optimism

Ongoing trade tensions between the US and China continue to weigh on market sentiment, indirectly supporting the pound. President Donald Trump’s decision to double tariffs on steel and aluminium triggered an intense backlash from China, which accused the US of breaching the recent trade deal and threatened to retaliate.

At the same time, optimism about the British economy is helping to sustain demand for the pound. The International Monetary Fund (IMF) upgraded the UK’s 2025 growth forecast to 1.2% from 1.1%. However, it also warned Chancellor Rachel Reeves of the need to exercise strict fiscal discipline ahead of her budget presentation on 11 June.

Inflation remains elevated, particularly in the food sector, where prices rose by 4.1% in May – the highest increase since February 2024. According to Kantar, this has prompted UK consumers to seek more discounts and shift towards cheaper brands.

Due to persistent inflation, the market is currently pricing in only a 40-basis-point rate cut from the Bank of England this year.

Technical analysis of GBP/USD

On the H4 chart, GBP/USD continues to develop the fifth wave of growth towards 1.3648. The market is consolidating near 1.3515 and is expected to break upwards towards 1.3616, with the wave potentially extending to 1.3648. If the market breaks downwards, a further correction to 1.3400 is possible before resuming growth. The MACD indicator confirms the bullish scenario, with its signal line above zero and pointing firmly upwards.

On the H1 chart, GBP/USD formed a consolidation range around 1.3515 and broke upwards, nearly hitting the local target of 1.3559. The market is now undergoing a correction, targeting 1.3489. Once this pullback is complete, the next growth wave may reach 1.3583. The Stochastic oscillator supports this view, with its signal line below 50 and heading sharply downwards towards 20, suggesting room for a short-term dip before renewed upward momentum.

Conclusion

GBP/USD remains firm near multi-year highs, supported by a mix of global trade tensions, domestic economic optimism, and elevated inflation. Technically, the outlook remains bullish, with key targets at 1.3583, 1.3616 and 1.3648. Support levels are at 1.3489 and 1.3400 in the event of a pullback. The pound’s relative stability continues to position it as one of the more resilient major currencies in the current environment.