- “Great Progress” made in Iran/US talks despite Trump’s interference
- UK Prime Minister announces his resignation
- US dollar extends gains but opens below its overnight peak
USDCAD open: 1.4173, overnight range 1.4165-1.4194, close 1.4155, WTI 75.34, Gold 4,208.41
The Canadian dollar continued to be weighed down following Friday’s weaker-than-expected Canadian Retail Sales data for April. Economists suggest higher gasoline prices squeezed household budgets and weighed on discretionary spending.
In addition widening US and Canadian interest rate differentials added to the Canadian dollar selling pressure.
WTI oil prices fell on Friday and then consolidated overnight. However, the geopolitical drama triggered a brief rally that pushed prices to 78.08 before they retreated to an overnight low of 74.92. While the Strait of Hormuz remains open, shipping traffic has slowed as many operators remain wary of the risks.
Canada's CPI report is expected to show inflation rising 0.7% m/m in May, up from 0.4% in April, while the annual rate is forecast to increase to 3.0% from 2.8%.
FX markets opened after a weekend of contradicting drama around US and Iran peace talks in Switzerland. Vice President Vance was engaged with an Iranian delegation when President Trump threatened to bomb Iran in response to Hezbollah's continued attacks on Israel. Iran retaliated by announcing the closure of the Strait of Hormuz and walked out of the talks.
However, mediators from Qatar and Pakistan succeeded in bringing both sides back to the table, and US and Iranian officials later reported that discussions had made meaningful progress.
Asian equity markets ended the session mixed. Japan's Topix gained 1.24%, Australia's ASX 200 slipped 0.14%, while Hong Kong's Hang Seng Index finished unchanged.
As of 7:20 am, European markets are mostly lower, with the exception of the UK FTSE 100, which has advanced 0.39%. France's CAC 40 has fallen 0.42% and Germany's DAX is down 0.13%. S&P 500 futures are off 0.13%, the 10-year Treasury yield is 4.494%, and the DXY is 100.91 after touching 101.02 overnight.
EURUSD traded in a 1.1442-1.1474 range and struggled to establish momentum in either direction. Residual pressure from what many viewed as a hawkish FOMC outcome was offset by optimism surrounding improving US-Iran relations. EURUSD technicals remain bearish below 1.1590, with traders focused on a break beneath 1.1410.
GBPUSD traded in a 1.3184-1.3235 range and swung sharply before recovering to session highs in New York. UK Prime Minister Keir Starmer announced his resignation but will remain in office until Labour selects a successor. Poor local election results and a series of questionable decisions left many MPs openly dissatisfied with his leadership. The UK now appears set to search for its seventh leader in less than a decade.
USDJPY traded in a 161.24-161.79 range and continued its steady climb. The wide US-Japan interest rate differential, elevated oil prices, and broad US dollar demand remained supportive. Intervention warnings have had little impact.
AUDUSD traded in a 0.6994-0.7019 range with a cautious tone as geopolitical tensions remained elevated, particularly following Trump's latest threat against Iran. Support on dips came from the RBA's relatively hawkish outlook. Traders are now focused on Wednesday's inflation report for signs that an August rate hike remains a realistic possibility.
USDMXN traded in a 17.3164-17.3685 range and remained supported by alternating headlines surrounding US-Iran relations and broader US dollar strength. Rising Treasury yields added to the bid tone and helped underpin demand throughout the session.
