- US and Iran violate ceasefire
- Oil prices surge, risk sentiment soured
- US dollar catches a bid on safe-haven demand
USDCAD open: 1.3817, overnight range 1.3788-1.3820, close 1.3800, WTI 90.69, Gold 4,498.45
The Canadian dollar retreated as fresh demand for the US dollar swept across major currency pairs, triggered by the breakdown of the Iran-US ceasefire. Beyond the geopolitical flare-up, the greenback is drawing additional support from a shift in investor psychology. Rising earnings from AI and technology stocks have given markets enough of a buffer that Middle East tensions and the resulting oil-driven inflation pressure are being shrugged off as a minor inconvenience.
The pair is finding further traction from Canada's deteriorating economic backdrop. Two consecutive quarters of contraction have put the recession question squarely on the table, with GDP slipping 0.1% year-over-year in Q1 and an additional 0.1% month-over-month in March.
WTI carved out an 88.71-91.25 range before settling near 90.67 in early New York dealing. The ceasefire collapse drove the initial surge, though prices retreated once it became clear neither party was prepared to push the confrontation further.
A weekend US strike on an Iranian missile installation shattered the ceasefire, drawing a retaliatory Iranian attack on a American military base in the region. WTI crude surged 4.0% on the news, pulling the dollar modestly higher across the board.
Friday's nonfarm payrolls report dominates the week's data calendar, with consensus sitting at 85,000 new positions against April's 115,000 print. Today's ISM Manufacturing PMI, forecast at 53.0 versus April's 52.7, is the immediate focus and should offer Wall Street early directional guidance.
Equity futures are pointing higher despite the renewed Middle East hostilities. US traders appear largely unbothered by the conflict, treating it as a manageable irritant rather than a market threat — a view underpinned by the inflation cushion that AI and technology earnings have provided.
Jerome Powell used Sunday's acceptance of the John F. Kennedy Profile in Courage Award to deliver a pointed defence of Fed independence, cautioning that any administration successfully removing central bank officials over policy disagreements would set a precedent every future administration could exploit, ultimately gutting the institution's credibility.
Asian markets closed with Tokyo's Topix shedding 0.42%, the Hang Seng adding 0.86% and Australia’s ASX 200 finishing unchanged.
As of 7:30 am, the German Dax has risen 0.33%, the French CAC 40 is flat and the UK’s FTSE 100 is down 0.23%. S&P 500 futures are ahead 0.26%. The 10-year Treasury yield sits at 4.463%, and the DXY is 99.06
EURUSD traded sideways in a 1.1641-1.1685 band. Greenback demand tied to the Iran confrontation offset support from the anticipated ECB rate hike on June 11. The ECB's June survey showed Eurozone households expect near-term inflation to hold at 4.0%, reflecting stubborn cost-of-living and energy pressures. German retail sales matched forecasts while the May manufacturing PMI nudged higher to 51.6 from 51.4.
GBPUSD drifted in a 1.3446 -1.3476 range. The renewed Middle East flare-up unwound the oil-driven lift that had buoyed sterling through the closing days of May. Governor Bailey signalled last week that the BoE sees no urgency to move policy until the data picture sharpens.
USDJPY pushed toward the upper end of a 159.31-159.50 range, underpinned by the persistent yield gap between the Fed and the BoJ, compounded by rising oil prices. Markets are keeping a cautious eye on the BoJ after Friday’s comment by Finance Minister Katayama about decisive action should yen moves become disorderly. The Jibun Bank Manufacturing PMI held steady at 54.5.
AUDUSD traded quietly in a 0.7171-0.7191 range while largely ignoring the latest US and Iran hostilities. The TD-MI inflation gauge climbed to 4.4% in May from 4.3% the prior month.
