- Equities Rally on Japan’s bond plans
- US Durable Goods Orders data on tap.
- US rallies across the board on lower Treasury yields.
USDCAD: open 1.3761, overnight range 1.3722.1.3769, close 1.3737, WTI 61.67, Gold 3298.30
The Canadian dollar rally stalled overnight after Japan’s Ministry of Finance’s hint of a long-bond issuance tweak sparked renewed demand for US Treasuries and by default, the US dollar. The greenback rallied across the board and the Canadian dollar was collateral damage.
Canadian dollar price action continues to be determined by events south of the border. Traders are focused on Trump’s budget plans and its impact on US debt in addition to the ongoing tariff war.
Eventually, traders may notice that the government’s spending plans due to tariff defence and increased military spending will dwarf the record spending during the pandemic.
Oil prices are trading sideways ahead of the OPEC meeting when another production increase that takes effect July 1, is expected to be announced.
Japan’s Ministry of Finance was unhappy with the dismal 20-year bond auction which lifted long-term yields. Officials hinted that they may scale back long bond issuance which triggered renewed demand for US Treasuries and the US dollar.
Asian equity indexes closed higher, with gains in Tokyo, Sydney, and Hong Kong. European indices followed suit, buoyed by improved sentiment data. U.S. futures are climbing. Gold prices slipped as risk appetite returned.
EURUSD traded in a 1.1337-1.1408 range but remains comfortably above Friday’s low near 1.1280. The euro got a brief lift from upbeat economic sentiment numbers, though Trump’s threat to jack up tariffs on EU imports to 50% put traders on edge. EU officials have stepped up talks and quietly mapped out retaliation if needed.
GBPUSD held firm in a 1.3522-1.3587 band underpinned by Trump’s postponement of the EU tariff hike from June 1 to July 9. The news gave sterling a lift, and the short-term trend stays positive while prices remain north of 1.3440.
USDJPY snapped a losing streak and rallied from 142.12 to 144.18. The bounce came after Japan’s MOF floated plans to rein in long-term bond supply, reversing a surge in JGB yields. Traders largely shrugged off BOJ Governor Ueda’s inflation warnings, seeing them as yesterday’s news.
AUDUSD briefly topped 0.6537 then sank to 0.6450 by the New York open. Renewed U.S. Treasury demand helped the greenback regain ground. Still, worries over America’s swelling deficit may temper Aussie losses.
US Durable Goods Orders, Consumer Confidence, and the Case/Shiller Home Price index are due.
