- Iran/and US talks in Switzerland have been postponed
- US Markets closed today
- US dollar extends gains on safe-haven demand
USDCAD open: 1.4141, overnight range 1.4129-1.4160, close 1.4140, WTI 77.16, Gold 4,162.27
US markets are shut for Juneteenth.
The Canadian dollar drifted lower overnight in thinner-than-usual trade, with holidays in China and Hong Kong sapping liquidity in Asia.
The Loonies’ decline is powered by CAD/US rate spreads widening in the greenback's favour. Canada's has a growth problem and today's April retail sales will do nothing to brighten that picture, with the forecast at 0.6% m/m against March's 0.9%. Layer on the uncertainty hanging over the USMCA talks and the loonie has another weight around its neck.
Crude firmed on the back of the stalled US-Iran negotiations. WTI climbed to 78.43 before sliding back to 75.81. India said it would lay out roughly $1.6 billion to build and fill a fresh strategic petroleum reserve. Bloomberg reported that 40 tankers holding 80 million barrels of crude were lining up to transit the Strait of Hormuz, or were, at least, until the US-Iran talks broke down
The Iran-US ceasefire talks slated for Switzerland today have been postponed. No reason was given officially, though chatter points to Tehran treating Israel's ongoing strikes on Lebanon as a breach of the terms. That was enough to hand the greenback a modest bid and nudge Treasury yields up.
Equities across Asia finished in the red, or at least those that were trading did. Japan's Topix slipped 0.57% and Australia's ASX 200 shed 0.83%, while Hong Kong's Hang Seng sat out the session on holiday.
By 7:15 am, European markets were flat to softer. France's CAC 40 and Germany's DAX barely moved while Britain's FTSE 100 dropped 0.28%. S&P 500 futures fell 0.42%, the 10-year Treasury yield is 4.477%, and the DXY is 100.78,
EURUSD traded negatively in a 1.1418-1.1469 range, still buckling under expectations for higher US rates. The market read the FOMC as hawkish thanks to Chair Warsh's pledge to hit the 2.0% goal. Adding to the drag are the stalled US-Iran talks and a cautious tone heading into a weekend with US desks closed.
GBPUSD is choppy in a 1.3163-1.3241 band, rebounding off an Asian low caused by news of the delay to the US-Iran ceasefire and nuclear talks. The pair had already been on the back foot following the BoE's hold at 3.75%, with two members dissenting for a hike, but the mood brightened this morning on a sharp upside surprise in May retail sales, which jumped 3.2% y/y against a 1.9% forecast and a prior 0.1%.
USDJPY rose in a 160.99-161.46 range, as traders shrugging off official intervention warnings. The thinking in some quarters is that the prospect of higher US rates marks the start of a fresh dollar-strength cycle, in which case intervention would be a waste of effort. BoJ Deputy Governor Ryozo Himino cautioned that inflation could overshoot the 2.0% target and that the real risk is policymakers reacting too late.
AUDUSD steadied in a 0.6990-0.7023 range and clawed back its Asian losses through the European session. The hawkish Fed narrative weighed on the Aussie, though the RBA's matching stance offered a cushion.
USDMXN chopped in 17.3366-17.4023 band and reclaimed most of its overnight slide late in European trade. Traders are also keeping an eye on US-Mexico trade negotiations, with the USTR confirming a third round is set for July.
