Funda-FX wrap: all eyes turning towards inflationary risks, ECB to address QE next week

Funda-FX today was lighter on Wednesday in terms of the bulk of headlines, but, again, it was mostly about the ECB today. 

Four ECB members, including the ECB's chief economist Peter Praet, who wrote in a published speech, that the 14th June meeting will hold discussions on ending their asset purchase program.

On Tuesday, Bloomberg reported that sources had hinted to such discussions taking place next week which sent traders looking for a bargain in European assets, sending the euro from the 1.1650's to 1.1739 the high in NY trade. That rally extended on the confirmations today to a few pips shy of the 1.18 handle and the highest level since 22nd May this year. 

Analysts at Westpac explained that the yields on bonds that are currently benefiting from ECB buying rose sharply, including +10bp in France and the Netherlands, +14bp in Italy (10 year bonds) causing a spillover to the likes of the UK, where the 10 year gilt yield rose 9bp.

Elsewhere, Italian politics took a backseat and instead there was quite a stir from across the Channel where fears of the UK government losing traction on the recent progress made towards finalisations of the PM May's plan for the Irish backstop before the European Council meeting on June 28-29. However, "Mr Davis was furious to discover that the draft plan — drawn up by Mrs May’s chief Brexit official Olly Robbins — did not include an end date to make it clear that any emergency measures to ensure a smooth Irish border were temporary," an FT article explained. This news sent the pound on the offer from previous highs of 1.3443. 

Then, there were headlines that struck the Candian dollar that had otherwise fared well on trade data, relating to economic penalties against Canadia, despite the recent reports that the US TS had asked Trump that Canada would be exempted from tariffs on steel and aluminium imports. 

Key headlines:

• Iraqi OilMin: Market is stable and prices are good, no need for production increase
• Canada's Freeland: US tariffs on steel and aluminum are illegal
• Britain heading down a soft Brexit route, or maybe not, GBP/USD offered
• Atlanta Fed: GDPNow revised down to 4.5% from 4.8%
• Canada: Record exports and lower imports in April - NBF
• US: Trade poised to boost Q2 GDP - Wells Fargo
• EIA: Commercial crude oil inventories increased by 2.1 mln barrels
• Canada: Ivey PMI drops to 62.5 to miss market expectation of 69.7
• Canada: Municipalities issued $7.8 billion worth of building permits in April
• Canada: Exports rose 1.6% to a record $48.6 billion in April
• US: Nonfarm business sector labor productivity increased 0.4% in Q1 2018
• US: Goods and services deficit was $46.2 bln in April, down $1.0 billion from $47.2 billion in Mar