- Trump’s prime time address was a rehashed rant about 2020 election loss
- US and Iran continue attacks which underpinned oil prices.
- USD is trading a touch firmer due to fresh risk aversion sentiment.
USDCAD open: 1.4030, overnight range 1.4026-1.4048, close 1.4042, WTI 80.45, Gold 3,997.87
The Canadian dollar has gained around 1.0% this week and it is consolidating the move in early NY trading.
The loonie is being supported by narrowing CAD/US interest rate spreads. Yesterday's US data was better than expected, which suggested the Fed could leave rates unchanged for longer than previously thought. The news supported the narrowing of the 10-year CAD/US interest rate differential from -107.4 on Monday to -99.9 this morning. The 2-year moved from -138.8 to -129.4 today.
Meanwhile, the conflict between Washington and Tehran grinds on. American forces struck Iranian infrastructure for a sixth consecutive day, retaliation for the closure of the Strait of Hormuz by an Iranian military and navy that barely exist on paper.
Crude prices stayed contained since oil traders continue to bet on an eventual resolution, though buyers emerged ahead of the weekend.
Equities are commanding more attention than oil. Semiconductor shares are sliding hard, raising the risk that profit-taking spreads into a broader rout, and US stock index futures point to a steep drop at the open.
The latest American data told a familiar story of resilience. Retail softness came almost entirely from gasoline stations, where receipts dropped 5.3% on cheaper pump prices. Strip out gas and sales climbed a healthy 0.7%, with the control group up 0.5% and May revised higher to 1.0% from 0.9%. Weekly jobless claims came in at 208,000 against a 217,000 forecast, continuing claims slipped to 1.805 million, and the Philadelphia Fed Manufacturing Index surged to 41.4, demolishing both the 13.0 consensus and June's 10.3 print.
Taken together, the numbers suggest the same energy price declines that flattered this week's inflation reports also dressed up the retail headline. Look past the oil effect and consumers keep spending, factories keep producing, and the job market shows no strain. The Fed can afford to wait before cutting rates.
Overnight, Asian equity markets took a beating. Japan's Topix sank 2.72%, Hong Kong's Hang Seng fell 1.78%, and Australia's ASX 200 gave up 0.50%.
As of 7:30 am, the French CAC 40 off 0.86%, the German DAX down 0.73%, and the UK FTSE 100 has lost 0.22%. S&P 500 futures have dropped 0.89%, the 10-year Treasury yield sits at 4.518%, and the DXY is at 100.83.
EURUSD drifted in 1.1435-1.1452 range. Eurozone inflation matched forecasts, with HICP at -0.1% m/m and 2.8% y/y, and the news passed without a ripple. Attention now turns to next week's ECB meeting. Policymakers are expected to stand pat, though a spike in oil prices could change that.
GBPUSD ranged in a 1.3436-1.3482 band and is grinding lower in subdued dealing. Andy Burnham takes over as leader of the UK Labour Party today and moves into Downing Street next week, which is capping the pound alongside deteriorating risk appetite from the US and Iran hostilities and the equity sell-off.
USDJPY ticked higher in a 162.14-162.47 band, due to both climbing oil prices expectations that the BoJ will leave rates at the end of July meeting.
AUDUSD traded lower in a 0.6966-0.7003 range. Prices are supported from this week's US data, which argues against Fed hikes while the RBA leans hawkish.
