- Risk rally halted amid renewed tensions.
- US Consumer confidence data on tap
- US dollar claws back some of Monday’s losses
USDCAD open: 1.3801, Range since Mon.1.3795-1.3823. Mon. close 1.3802, WTI 99.04, Gold 4,522.34
The Canadian dollar remained trapped in a familiar range as traders reacted to constantly shifting US dollar sentiment tied to developments in Trump’s war with Iran. Weekend speculation about an imminent ceasefire deal sparked a modest risk-on rally Monday, but optimism faded quickly after Washington confirmed “self-defence” strikes against Iranian targets.
WTI oil prices drifted lower last week on hopes of a more durable US-Iran truce, touching $89.33 Monday before rebounding to $93.60 following renewed hostilities. Prices have since eased again, although some analysts believe Brent crude could remain above $100/barrel for an extended period because of the scale of potential supply disruptions.
FX markets whipsawed between Monday’s optimism and Tuesday’s renewed caution as traders responded to rapidly changing US-Iran headlines.
Monday’s session delivered a broad risk-on move after reports suggested Washington and Tehran were nearing a ceasefire agreement that could reopen Hormuz. Oil prices tumbled nearly 7%, weighing on the US dollar and global equities rallied.
By Tuesday, sentiment had deteriorated after US “self-defence” strikes targeted Iranian missile facilities and mining vessels near Hormuz.
Crude prices bounced from their lows and the greenback edged higher. Even so, markets continued to believe diplomacy remained possible, limiting demand for traditional safe havens and preventing a more aggressive oil rally.
Asian equities gave back a portion of Monday's gains after the renewed US strikes on Iran. Japan's Topix slipped 0.10%, Australia's ASX 200 fell 0.39% and Hong Kong's Hang Seng closed little changed.
As of 7:10 am, the German DAX is off 0.46%, the French CAC 40 has shed 0.83% while the UK FTSE 100 bucks the trend with a 0.71% gain. S&P 500 futures are up 0.67%, the 10-year Treasury yield sits at 4.486%, and the DXY is at 99.03.
EURUSD opened the week with a gap higher on improved risk appetite before trading sideways in a Monday-Tuesday range of 1.1606 -1656. Additional support came from ECB policymaker Isabel Schnabel's call for a June rate hike.
GBPUSD traded in a two-day range of 1.3432 -1.3511. Prices gapped higher in Asia on Monday before fading steadily through Tuesday's session. Hopes for an Iran-US resolution underpinned the pair, though weak domestic data continued to limit gains.
USDJPY drifted narrowly in a 158.75-159.24 band, supported by the bounced in crude prices and steady Treasury yields. Upside remains restrained by intervention risk and diminished BOJ rate hike expectations following last week's soft domestic inflation print.
AUDUSD consolidating Monday's risk-on advance in a 0.7127 to 0.7182 range, with price action largely waiting on tomorrow's Australian inflation release.
Today’s US calendar features Consumer Confidence and Case-Shiller Home Prices, while Canada releases no major data.
