- Trump’s China tour hardly a resounding success.
- Treasury yields soar driving greenback higher
- The US dollar rises on renewed negative risk sentiment
USDCAD open: 1.3754, overnight range 1.3715-1.3758, close 1.3707, WTI 105.12, Gold 4,546.98
The Canadian dollar dropped overnight as global risk sentiment deteriorated. Trump’s China tour was far from a resounding success, suggesting he may need to refocus on Iran. The prolonged closure of the Strait of Hormuz is pushing US inflation higher, even as US retail sales remain resilient. The prospect of a Fed rate hike lifted the 10-year Treasury yield to 4.531%, while the 2-year yield touched an overnight peak of 4.069%.
Prime Minister Carney’s “climate-change warrior” instincts are resurfacing. He talks aggressively about promoting pipelines and Canada’s oil industry, then attaches a massively expensive carbon-capture project as a condition for approval. That approach is hardly investor friendly.
WTI oil prices climbed from 99.41 yesterday to 105.31 overnight before retreating to 103.17 in New York trading. The rally reflects expectations that Trump could renew military action against Iran.
Only second-tier economic data is on tap today. Canadians are likely more focused on getting an early start to the first long weekend of the summer.
Trump’s China trip is already being spun by the White House although the visit only produced vague language about “frameworks” and “strategic stability,” but almost no concrete details.
Financial markets were unimpressed. Investors have turned defensive as the Strait of Hormuz remains closed, keeping global inflation pressures elevated and adding to concerns inside the US.
Bond markets are getting crushed. Yields across Europe, Britain, and the United States surged as traders worried about stubborn inflation, deteriorating US finances, and the possibility of another Fed rate hike. UK gilts weakened amid speculation about Keir Starmer’s political durability, while long-dated German and French bond yields climbed to decade highs.
Asian stock markets ended lower across the board. Australia’s ASX 200 slipped 0.11%, Japan’s Topix lost 0.39%, and Hong Kong’s Hang Seng tumbled 1.62%.
By 7:35 am, Germany’s DAX has fallen 1.57%, France’s CAC 40 dropped 1.38%, and the UK FTSE 100 was lower by 1.52%. S&P 500 futures are down by 0.87 although Treasury yields continued climbing, with the 10-year note reaching 4.537%. The DXY index traded at 99.05 while gold (XAUUSD) held near 4,565.90.
EURUSD, sank in a 1.1617-1.172 range following a break of the uptrend support with the selloff amplified by widening two-year interest rate differentials and deteriorating risk sentiment.
GBPUSD dropped in a 1.3329-1.3409 range, weighed down by the same global risk aversion hitting other currencies, with an added layer of domestic political anxiety. Speculation that Andy Burnham, a former lefty Birmingham mayor, might mount a leadership challenge against Starmer rattled sterling holders.
USDJPY was steady in a158.27 -158.68 band. Prices were underpinned by a firmer greenback, rising Treasury yields and elevated oil prices.
AUDUSD, which held a 0.7237 to 0.7265 range, rallied for all the same reasons as the other major currencies with the gains fueled by rising global bond yields.
Todays US and Canadian data will be a non-event as Canadians try to get an early start to the long weekend.
