Morning Commentary & Currency Insights – June 1, 2018

Major currencies are trading sideways this morning after the movement we saw yesterday as the market is reluctant to move in any concerted direction. US allies were not pleased with the Trump administration after metal and aluminum tariffs were imposed on Canada, Mexico and the EU. The tariffs should not necessarily come as a shock as Trump had stated in March that June 1^st would be the deadline for the exceptions on many allied nations facing US tariffs. Canada has responded with a its own sanctions on US steel, aluminum and other products that will take effect July 1^st. The EU and Mexico also plan to retaliate accordingly, causing fears of a full out international trade war. EUR is down slightly today despite easing political tensions in Italy. The Populist parties Five Star and League have formed a government and received the approval from the President. Spanish PM Rajoy lost the confidence vote this morning. Socialist opponent Pedro Sanchez apparently has enough support to take over the leadership position. Sterling remains subdued with a lack of primary data and Brexit policy concerns.

Investors are looking ahead to non-farm payrolls data (190k vs 168k) and US unemployment rate (3.9% vs 3.9%) at 8:30, with CAN RBC Manufacturing PMI and US ISM Manufacturing/Employment numbers out later in the morning. Short term support and resistance is 1.2925 and 1.3000 respectively, with RSI at 57 and the 200-day moving average residing at 1.2662.