Trade War mode back on?

• According to media, China warned that it would be ready to fight back, after US officials said that it still could impose tariffs on imports of around 50 billion USD. The issue also includes restrictions to Chinese investments in the US.
• Specifically, the Chinese commerce ministry stated that the US measures are against WTO rules and that China reserves the right to take countermeasures.
• Chinese officials called the US “to keep its promise and meet China halfway in the spirit of the joint statement” they made earlier.
• Further escalation could strengthen safe havens.

BoC remains on hold, CAD strengthens

• BoC kept its interest rate unchanged yesterday at +1.25%, however issued a rather hawkish accompanying statement.
• The statement dropped tis reference for the bank as being cautious and did not mention the NAFTA negotiations per se.
• The bank mentioned clearly that higher rates will be needed to keep inflation near target and that a gradual approach guided by incoming data will be taken, practically paving the way for a rate hike in the next meeting.
• Currently, CAD OIS imply a possibility for a rate hike of 63.56% in July.
• Overall, the CAD strengthened on the good news and it could strengthen even further should there be more signals for a possible rate hike in the future.

Today’s other economic highlights

• France: Preliminary CPI (EU Norm.) for May, Survey:+2.0% yoy Prior:+1.8% mom, 06:45 (GMT), Could support EUR
• Eurozone: Preliminary CPI for May, Survey: +1.6% yoy Prior:+1.2% yoy, 09:00 (GMT), Could strengthen EUR
  Unemployment Rate for April, Survey: 8.4% Prior: 8.5%, 09:00 (GMT), Could support EUR
• US: Preliminary Core PCE prices for May, Survey: +1.8% yoy Prior:+1.9% yoy, 12:30 (GMT), Could weaken USD
  Pending Home Sales for April, Survey: +0.4% mom Prior: +0.4% mom, 14:00 (GMT), Could weaken USD
  EIA weekly Crude Oil Stock, Survey:-1.000m Prior:+5.778m , 15:00 (GMT), Could support Oil prices
• Canada: GDP (Annualized) for Q1, Survey: +1.8% qoq Prior:+1.7% qoq, 12:30 (GMT), Could strengthen CAD
  Speakers: As for speakers, BoC’s Leduc (16:20, GMT) and FOMC members Bostic (16:30, GMT+3) and Brainard (17:00, GMT+3) speak.

IronFX Daily Report ‘May 31st’