USD / CAD - Canadian dollar bounces back
- Trump declares a cease-fire in Iran/Israeli war
- WTI oil prices plunge, stock markets rally.
- US dollar reverses all yesterday’s gains.
USDCAD: open 1.3714, overnight range 1.3708-1.3738, close 1.3735, WTI 66.23, Gold 3319.68
The Canadian dollar reversed yesterday’s losses due to a wide-spread unwinding of US dollar safe-haven trades. The move was triggered after President Trump switched his war-monger hat to a peacemaker ballcap.
President Trump declared that hostilities between Iran and Israel officially ended in a TruthSocial post and markets reacted positively—buying stocks and selling oil and the greenback.
Oil markets reacted swiftly. Crude wiped out gains accumulated since June 11, plunging nearly 18% from its recent peak. The ceasefire dramatically reduced concerns over a potential closure of the Strait of Hormuz, a chokepoint for a fifth of global oil flows. Prices have since bounced to 66.62 as traders locked in profits.
The Canadian dollar sell-off ran out of steam ahead of today’s Canadian inflation report. CPI is expected to rise 0.5% m/m in May (previous -0.1%). A higher than expected result would impair the Bank of Canada’s ability to cut rates.
With the dust settling in the Middle East, Trump pivoted back to one of his favorite targets: Federal Reserve Chair Jerome Powell. In another TruthSocial post, he complained that “Too Late” Jerome continued to refuse to slash rates. Powell is scheduled to testify today before the US House Financial Services Committee.
Global equities to the cease-fire news enthusiastically. Australia’s ASX 200 rose 0.95% and Japan’s Topix climbed 0.73%. European markets are sharply higher as well. Germany’s DAX leads the way with a 1.73% gain, while France’s CAC 40 is up 1.08%. As of 7 15 am EDT, S&P 500 futures are 0.82% higher and the US 10-year Treasury yield stands at 4.34%.
EURUSD erased the prior session’s losses and traded in a 1.1572-1.1623 range. The ceasefire has turned investor focus back on the economic outlook and interest rate policy. The German Ifo index rose for a sixth consecutive month.
GBPUSD surged from 1.3373 to 1.3617 following the ceasefire, buoyed by the broad risk-on tone. The pound may also be getting a lift from anticipation around the new UK-US trade deal set to begin next week.
USDJPY tumbled on the wave of risk appetite, sliding from 147.63 to 144.85 before stabilizing near 145.01. The drop was aided by a decline in US Treasury yields.
AUDUSD climbed from 0.6450 to 0.6515 on the back of broad US dollar weakness. The pair remains supported by the belief that recent PMI data could convince the Reserve Bank of Australia to hold steady at its next meeting.
Today’s US data includes Current Account, Redbook, Housing Price Index and Case-Shiller Home Prices. Fed Chair Jerome Powells Congressional testimony overshadows it all.
