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For the 24 hours to 23:00 GMT, the AUD declined slightly against the USD and closed at 0.7570.

LME Copper prices rose 0.22% or $15.0/MT to $6825.0/MT. Aluminium prices rose 0.88% or $20.0/MT to $2285.5/MT.

In the Asian session, at GMT0300, the pair is trading at 0.7560, with the AUD trading 0.13% lower against the USD from yesterday’s close.

Overnight data showed that Australia’s AiG performance of manufacturing index recorded a fall to a level of 57.5 in May, compared to a registered a level of 58.3 in the previous month.

Elsewhere in China, Australia’s largest trading partner, the Caixin/Markit manufacturing PMI remained unchanged at a level of 51.1 in May, against market expectations for an advance to a level of 51.2.

The pair is expected to find support at 0.7546, and a fall through could take it to the next support level of 0.7531. The pair is expected to find its first resistance at 0.7584, and a rise through could take it to the next resistance level of 0.7607.

Moving forward, investors would focus on Australia’s 1Q GDP, retail sales and trade balance data, all scheduled to release next week.

The currency pair is trading in between its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, Gold declined 0.29% against the USD and closed at USD1303.00 per ounce.

In the Asian session, at GMT0300, the pair is trading at 1302.8, with gold trading slightly lower against the USD from yesterday’s close.

The pair is expected to find support at 1298.70, and a fall through could take it to the next support level of 1294.60. The pair is expected to find its first resistance at 1309.20, and a rise through could take it to the next resistance level of 1315.60.

The yellow metal is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, Silver declined 0.54% against the USD and closed at USD16.45 per ounce, tracking losses in gold prices.

In the Asian session, at GMT0300, the pair is trading at 16.44, with silver trading slightly lower against the USD from yesterday’s close.

The pair is expected to find support at 16.36, and a fall through could take it to the next support level of 16.28. The pair is expected to find its first resistance at 16.56, and a rise through could take it to the next resistance level of 16.69.

The white metal is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, Crude Oil declined 1.53% against the USD and closed at USD67.10 per barrel, after the Energy Information Administration (EIA) reported that US crude production jumped to a record high of 10.47 million bpd in March.

Nevertheless, the EIA report also indicated that US crude oil stockpiles decreased 3.6 million barrels to 434.5 million barrels in the week ended 25 May.

In the Asian session, at GMT0300, the pair is trading at 66.94, with oil trading 0.24% lower against the USD from yesterday’s close.

The pair is expected to find support at 66.26, and a fall through could take it to the next support level of 65.58. The pair is expected to find its first resistance at 67.92, and a rise through could take it to the next resistance level of 68.90.

Crude oil is trading below its 20 Hr and 50 Hr moving averages.

Daily Pivots: (S1) 0.8769; (P) 0.8785; (R1) 0.8813; More...

EUR/GBP's strong rebound and break of near term falling channel revives the bullish case. Intraday bias is back on the upside for 0.8844 resistance first. Break will resume whole rebound from 0.8620 and target 0.8967 cluster resistance (50% retracement of 0.9305 to 0.8620 at 0.8963). Decisive break there will confirm medium term reversal. However, below 0.8755 minor support will turn bias neutral and mix up the near term outlook again.

In the bigger picture, for now, the decline from 0.9305 is seen as a leg inside the long term consolidation pattern from 0.9304 (2016 high). Such consolidation pattern could extend further. Hence, in case of strong rally, we'd be cautious on strong resistance by 0.9304/5 to limit upside. Meanwhile, in another decline attempt, we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside.

Trade war is the dominate theme for the market at the moment after US starts to impose steel and aluminum tariffs on its closest allies in Canada, Mexico and the EU. The move drew strong criticism from these countries and retaliation measures are on the way. Italy took a back seat as the populist government is finally formed. Giuseppe Conte could sworn in as soon as today. While clash between the eurosceptic government and EU is inevitable, at least for a short while, the turmoil is solved. US non-farm payroll and UK PMI manufacturing are still the main focuses of today. But trade tensions and development could remain the driver.

Reactions to the trade war between the US and its own allies were "relatively" mild. DOW closed down -251.94 pts or -1.02% only. S&P 500 lost -18.74 pts or -0.69% while NASDAQ was down -20.33 pts or -0.27%. Nikkei is indeed trading up 0.06% at the time of writing while Hong Kong HSI is down just -0.15%.

In the currency markets, Sterling is surprisingly trading as the weakest one for the week, down against all other major currencies. And, it's followed by Australian Dollar as the second weakest. On the other hand, New Zealand Dollar is the strongest one for the week, followed by Yen. For today, Dollar is broadly higher as it's paring some of the losses earlier this week. Aussie is the weakest one.

Technically, a notable development was EUR/GBP's break of near term falling channel resistance. That indicates some underlying bullishness and focus will be on 0.8844 resistance for today.

EU Juncker on US steel tariffs: It's protectionism, pure and simple

In response to US steel and aluminum tariffs, European Commission President Jean-Claude Juncker immediately condemned that as "protectionism, pure and simple". The US actions are "unjustified" and "at odds with WTO rules". He also pledged to " defend the Union's interests, in full compliance with international trade law."

Trade Commissioner Cecilia Malmstrom also criticized that using "threat of trade restrictions" to obtain concessions is not the way between "longstanding partners, friends and allies." And, she added "now we have clarity, the EU's response will be proportionate and in accordance with WTO rules." EU will trigger a dispute settlement at the WTO and impose rebalance measures. Full statement of the EU here. Also, the EU has already published the list of US products for re-balancing back on May 18.

Canada planned retaliatory tariffs on CAD 16.6b in US imports

Canadian Prime Minister Justin Trudeau criticized Trump's steel and aluminum tariffs as "totally unacceptable" and announced retaliatory tariffs on CAD 16.6b in US imports.  A 15-day consultation period immediately began the tariffs will come into effect on July 1. There are two list of goods, one list that will be subject to a 25% tariff; a second list that will be subject to a 10% tariff. The details of the goods can be found here.

Trudeau emphasized that "Americans remain our partners, our allies and our friends" and "the American people are not the target" of the retaliation measures. He pledged to continue to make arguments based on logic and common sense" and hoped that "eventually they will prevail against an administration that doesn't always align itself around those principles."

Foreign Minister Chrystia Freeland, also said that the unilateral trade restrictions by the US are "in violation of NAFTA and WTO trade rules". And Canada will launch dispute settlement proceedings under  NAFTA Chapter 20 and WTO Dispute Settlement. Freeland also pledged to "closely collaborate with like-minded WTO members, including the European Union" to challenge the "illegal and counterproductive US measures at the two. Statement can be found here.

Mexico to hit back US on agricultural and steel products

Mexican Economy Ministry said there are wide-range "equivalent" measures to counter the US steel tariffs. It's reported that Mexico will target agricultural products that could hit Trump's base states. And the measures will be in place until the US stops its tariffs.

It said in a statement that "Mexico profoundly regrets and condemns the decision by the United States to impose these tariffs on imports of steel and aluminum from Mexico." And, "Mexico reiterates its openness to constructive dialogue with the United States, its support for the international commerce system and its rejection of unilateral protectionist measures."

The Ministry also said Mexico buys more steel and aluminum from the US than it sells. And it's the top buying of US aluminum and second buyer of US steel.

Italy populist government formed, Conte as PM, Tria as economy minister, Savona as EU affairs minister

The political turmoil in Italy is now solved, at least in the near term, after a week of roller coaster ride. The anti-establishment 5-Star Movement and eurosceptic League agreed to form a political government again, averting a re-election. Law professor Giuseppe Conte remains the choice as prime minister and will sworn in on Friday. 5-Star and League leaders Luigi Di Maio and Matteo Salvini will be vice premiers.

Eurosceptic economist, 81-year-old Paolo Savona, who's rejected by President Sergio Mattarella as economy minister, will take the post of EU affairs minister. On the other hand, economics professor Giovanni Tria get the job of economy minister.

Conte said that "we will work hard to reach the objectives included in the government contract and to improve the quality of life of all Italians." He referred to "Contratto Per Il Governo Del Cambiamento" or "Contract for the Government of Change".

The new Cabinet will face a confidence vote in both houses were the coalition have a thin majority. But the  far-right Brothers of Italy, a League ally, said it would help by abstaining in that vote.

China Caixin manufacturing PMI unchanged at 51.1, export situation still disappointing

China Caixin manufacturing PMI was unchanged at 51.1 in May, slight below expectation of 51.2, indicating modest expansion. Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group noted that "the index for new export orders picked up in May, but remained in contraction territory, reflecting that the export situation was still grim." And, "overall, operating conditions across the manufacturing sector remained stable. The growth in the price of industrial products has gained momentum, however, the export situation was still disappointing."

Also release in Asian session, Japan PMI manufacturing was finalized at 52.8, revised up from 52.5. Japan capital spending rose 3.4% in Q1. New Zealand terms of trade dropped -1.90% qoq in Q1. Australia PMI manufacturing dropped to 57.4 in May, down from 58.3.

Looking ahead - UK PMI manufacturing and US non-farm payroll to watch

UK PMI manufacturing is a major focus in European session, and should indicate the strength of rebound in Q2 in UK economy. Eurozone will release PMI manufacturing revision. Swiss will also release PMI manufacturing.

Non-farm payroll report from US is the major focus later in the day. NFP is expected to show 190k growth in May. Unemployment rate is expected to be unchanged at 3.9%. The key still lies on wage growth as average hourly earnings is expected to rise 0.2% mom. US will also release ISM manufacturing and construction spending. Canada will releaser PMI manufacturing.

EUR/GBP Daily Outlook

Daily Pivots: (S1) 0.8769; (P) 0.8785; (R1) 0.8813; More...

EUR/GBP's strong rebound and break of near term falling channel revives the bullish case. Intraday bias is back on the upside for 0.8844 resistance first. Break will resume whole rebound from 0.8620 and target 0.8967 cluster resistance (50% retracement of 0.9305 to 0.8620 at 0.8963). Decisive break there will confirm medium term reversal. However, below 0.8755 minor support will turn bias neutral and mix up the near term outlook again.

In the bigger picture, for now, the decline from 0.9305 is seen as a leg inside the long term consolidation pattern from 0.9304 (2016 high). Such consolidation pattern could extend further. Hence, in case of strong rally, we'd be cautious on strong resistance by 0.9304/5 to limit upside. Meanwhile, in another decline attempt, we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside.

Economic Indicators Update

China Caixin manufacturing PMI was unchanged at 51.1 in May, slight below expectation of 51.2, indicating modest expansion.

Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said:

"The Caixin China General Manufacturing PMI stood at 51.1 in May, the same as the reading in April, showing that growth was sustained. The output and new order indices both rose, while the employment index dipped, indicating a stable supply and demand situation, but no signs of job creation in the sector. The index for new export orders picked up in May, but remained in contraction territory, reflecting that the export situation was still grim. The indices for output charges and input prices both rose, showing that product supply got tighter and price pressures remained high, which can help boost manufacturers' profits. Accordingly, the future output index rose slightly. The index measuring stocks of finished goods dropped, while the stocks of purchases index was unchanged from April, suggesting that product demand has been sufficient.

"Overall, operating conditions across the manufacturing sector remained stable. The growth in the price of industrial products has gained momentum, however, the export situation was still disappointing."

Full release here.

The political turmoil in Italy is now solved, at least in the near term, after a week of roller coaster ride. The anti-establishment 5-Star Movement and eurosceptic League agreed to form a political government again, averting a re-election. Law professor Giuseppe Conte remains the choice as prime minister and will sworn in on Friday. 5-Star and League leaders Luigi Di Maio and Matteo Salvini will be vice premiers.

Eurosceptic economist, 81-year-old Paolo Savona, who's rejected by President Sergio Mattarella as economy minister, will take the post of EU affairs minister. On the other hand, economics professor Giovanni Tria get the job of economy minister.

Conte said that "we will work hard to reach the objectives included in the government contract and to improve the quality of life of all Italians." He referred to "Contratto Per Il Governo Del Cambiamento" or "Contract for the Government of Change".

The new Cabinet will face a confidence vote in both houses were the coalition have a thin majority. But the  far-right Brothers of Italy, a League ally, said it would help by abstaining in that vote.

Canadian Prime Minister Justin Trudeau criticized Trump's steel and aluminum tariffs as "totally unacceptable" and announced retaliatory tariffs on CAD 16.6b in US imports.  A 15-day consultation period immediately began the tariffs will come into effect on July 1. There are two list of goods, one list that will be subject to a 25% tariff; a second list that will be subject to a 10% tariff. The details of the goods can be found here.

Trudeau emphasized that "Americans remain our partners, our allies and our friends" and "the American people are not the target" of the retaliation measures. He pledged to  continue to make arguments based on logic and common sense" and hoped that "eventually they will prevail against an administration that doesn't always align itself around those principles."

Foreign Minister Chrystia Freeland, also said that the unilateral trade restrictions by the US are "in violation of NAFTA and WTO trade rules". And Canada will launch dispute settlement proceedings under  NAFTA Chapter 20 and WTO Dispute Settlement. Freeland also pledged to "closely collaborate with like-minded WTO members, including the European Union" to challenge the "illegal and counterproductive US measures at the WTO. Statement can be found here.

The report from the US Energy Information Administration (EIA) shows that total crude oil and petroleum products stocks increased +1.76 mmb to 1194.01 mmb in the week ended May 25. Crude oil inventory dropped -3.62 mmb (consensus: -0.53 mmb) to 434.51 mmb, as inventories fell in 4 out of 5 PADDs. Cushing stock slipped -0.56 mmb to 35.54 mmb. Utilization rate added +2.1% to 93.9%. Meanwhile, crude production increased +0.04M bpd to 10.77M bpd for the week.

Refined oil product inventories jumped as production ramped up to the highest since January ahead of Memorial Day weekend. Gasoline inventory added +0.53 mmb to 233.43 mmb with demand largely unchanged at 9.69M bpd. The market had anticipated a -1.37 mmb decline in stockpile. Production rose +3.79% 10.43M bpd while imports fell -9.78% to 0.96M bpd during the week.

Distillate inventory increased for the first time since March 2018, adding +0.63 mmb to 114.63 mmb. The market had anticipated a -1.25 mmb draw. This came in despite the +18.75% jump in demand to 4.32M bpd.  Production gained +7.25% to 5.3M bpd while imports surged +887.5% to 0.24M bpd during the week.

Released after market close on Tuesday, the industry- sponsored API estimated that crude oil inventory gained +1 mmb during the week. For refined oil products, gasoline stockpile fell -1.68 mmb while distillate added +1.47 mmb.