ECB conference watched closely.

The German IFO business confidence index dipped to 88.5 for June from a revised 91.5 previously which was below consensus forecasts of 90.7 and the lowest reading of 2023. There was a smaller decline in the current conditions index together with a more substantial decline in the expectations index.

According to the IFO, there is weak demand in industry with order books falling. Company expectations remain weak while global rate hikes are dampening demand.

According to the German Bundesbank, the Germany economy has bottomed out with slight GDP growth expected for the second quarter.

The bank added that wages are rising strongly which will support disposable incomes. The bank also expects that inflation will slow further in the coming months, although overall price pressures are likely to remain very high.

Confidence remained fragile on Monday with further losses in equities and unease over the threat of interest rates staying higher for longer. There was a limited improvement in sentiment on Tuesday, especially with hopes that the

Developments in Russia will, however, continue to be watched closely.

There was further verbal intervention from the Japanese Finance Ministry on Tuesday. There were also reports that the Chinese state banks were selling dollars to underpin the yuan. These two factors curbed scope for further dollar buying in global markets.

The ECB Sintra monetary policy conference will start on Tuesday and the rhetoric will be watched closely, especially as there will be participation from Federal Reserve and Bank of England officials as well as the ECB council.

The latest Canadian inflation data will be released on Tuesday. Consensus forecasts are for a sharp decline in the headline rate to 3.4% from 4.4% previously with the core rate declining to 3.9% from 4.1%.

The Euro lost some ground after the German IFO data, but losses were limited. EUR/USD found some support below the 1.0900 level. A tentative recovery in equities helped underpin the Euro and it edged higher to 1.0925 on Tuesday. A tentative risk recovery curbed potential defensive dollar demand.

USD/JPY still found support just below 143.00 and rallied to 143.50. USD/JPY was little changed on Tuesday as Chinese state banks were reported as selling dollars.

The Swiss franc gained some support from fragile risk conditions and Russia concerns before a recovery on Tuesday as sentiment improved. EUR/CHF dipped to 0.9725 before a recovery to 0.9775. USD/CHF dipped sharply to 0.8910 before a recovery to 0.8950.

Sterling was held in tight ranges with high domestic yields offset by fragile risk conditions. GBP/USD settled just above the 1.2700 level and edged higher to 1.2735 on Tuesday.

Commodity currencies were held in tight ranges before gaining some traction on Tuesday as

risk conditions improved. AUD/USD settled around 0.6675 before a recovery to 0.6715. USD/CAD consolidated just above 1.3150 before a retreat to 1.3130.

Economic Calendar