- Risk aversion rises with Middle East tensions.
- Oil prices climb after Iran/Yemen Houthis target shipping.
- USD opens mixed but with a mild bid
USDCAD open: 1.4082, overnight range 1.4057-1.4090, close 1.4107, WTI 90.19, Gold 4,089.73
The Canadian dollar is trading in a tight, subdued range. Higher crude prices are capping topside momentum somewhat, though they're acting more as a mild drag than a hard ceiling. The bigger driver right now is escalating friction from the Trump administration.
US Trade Rep Jameson Greer signalled Washington's approach to CUSMA, suggesting a preference for separate bilateral arrangements over the existing trilateral pact. "I would love to have by the end of the year at least some arrangements, one with Canada, one with Mexico."
Tuesday, Trump piled on with a fresh 50% tariff covering a broad swath of Canadian exports, autos included.
WTI climbed from 87.42 to 90.73 on growing fears that Trump is steering toward a broader military confrontation. Secretary of State Rubio weighed in on Iran's stance saying they do not seem to have any interest in talking.
On the data front, Canadian retail sales ex-autos are forecast to jump 1.4%, a sharp acceleration from April's tepid 0.1% gain.
Global risk appetite soured further overnight as climbing oil prices reignited inflation worries, a key factor pushing US Treasury yields higher. That combination of rising rates and fresh tech-sector turbulence pressured equities, while gold slid nearly 1.05. Alphabet shed 1.24% on concerns over its capex outlook, and Tesla dropped 1.3% following Q2 earnings that missed estimates by 37%. Trump's newly unveiled global tariff plan added another layer of pressure.
Asian equity markets were mixed as Japan reopened for trade, with the Topix jumping 2.44%. Hong Kong's Hang Seng and Australia's ASX 200 both finished little changed.
As of 7:40 am, European equities are edging higher across the board. London's FTSE 100 has gained 1.31%, the French CAC 40 is up 0.96%, and the German Dax has risen 0.35%. S&P 500 futures are down 0.35%, the 10-year Treasury yield sits at 4.641%, and the DXY is 101.17.
EURUSD traded in a 1.1397-1.1436 range and is at the bottom of the band heading into the ECB meeting. The ECB is widely expected to announce a "hawkish hold" due to inflationary risks from rising crude prices.
GBPUSD churned between 1.3361 and 1.3394, and is being squeezed by higher oil prices, modest dollar safe-haven flows, cooling inflation and lingering political noise over fiscal policy.
USDJPY drifted in a 163.00-163.44 band. Prices are supported by higher crude prices and climbing US Treasury yields though gains are being tempered by the risk of BoJ intervention.
AUDUSD popped then dropped in a 0.6987-0.7022 band, getting an early boost from a stronger-than-expected jobs report. Australia added 76,300 positions in June against a forecast of just 15,000, while May's figure was revised up to 44,000. The rally faded and the pair is now near its session low.
