Economic Outlook and Summary
June turned out to be more bark than bite. Markets braced for tariff fallout, Fed pivot signals, and a growth scare—but what they got was a sideways drift and more questions than answers. Trump’s April tariff barrage still casts a long shadow, but foreign retaliation has been conspicuously restrained—so far.
Gold, attempted another run at April’s $3500.00 record but fell short and it finished the month at $3301.00. Meanwhile, equities rebounded hard. The S&P 500 closed June at 6,204.95, reversing all of May’s losses on tech stock gains, upbeat growth data, and increasing Fed rate cut expectations.
The U.S. 10-year yield jumped from 4.31% to 4.53% early in the month before dropping to 4.23% at month-end. Mixed inflation and spending data muddied the outlook, and dovish Fed speak from two voting policymakers sparked the volatility, but tariffs remain a wild card.
Looking ahead, July features key inflation reports, the first look at Q2 U.S. GDP, and a July 9 tariff deadline. Trump announced he would send tariff letters to all 170 countries that export to the U.S. The letter will inform them of the tariff that they must pay, which will be in either the 10–20% or the 60–70% range, and those rates will be effective August 1. That suggests July will be a very choppy and volatile trading month.
The USD and Federal Reserve
The greenback slipped into July on the defensive, with the DXY drifting from 99.47 to 96.40 in June. Traders were conflicted with Fed Chair Jerome Powell’s “wait-and-see” approach to monetary policy contrasting with Governors Michelle Bowman and Christopher Waller, who appeared to want to lower rates. Fed Chair Powell’s view was reinforced by June’s PCE report and the July 3 nonfarm payrolls and weekly jobless claims data.
However, Trump has injected a note of uncertainty into the Fed monetary policy outlook with his latest rants and insults aimed at Mr. Powell for not cutting interest rates.
For July, DXY could stay under pressure ahead of the July 11 CPI release, Q2 GDP on July 25, and the FOMC meeting on July 30.
The Canadian Dollar and Bank of Canada
The Canadian dollar is trending higher but spent June churning inside a wide trading band. Unfortunately, the gains are being fueled solely by external influences, particularly the narrowing of Canadian and U.S. interest rate differentials. The CAD/US 10-year spread dropped from -118.3 on June 8 to 92.0 on July 2. The Bank of Canada left rates unchanged for the second meeting in a row at the beginning of July but could cut rates on July 30 if inflation drops and the economic outlook worsens.
Oil Prices
June was a wild month for oil prices. WTI started at 61.17 and soared to 78.44 in the wake of Israel’s attack on Iran’s nuclear sites. The U.S. got involved and used “bunker-buster” bombs to increase the odds that Iran’s nuclear infrastructure was destroyed. Iran’s feeble response and Trump’s declaration of an Israel/Iran ceasefire shifted the focus back to oversupply concerns. OPEC is expected to announce a 411,000-barrel supply increase, effective August 1, at its July 5 meeting. The July outlook suggests a drop to 59.50 on a move below 64.00.
Bank 2025-USD/CAD Q2 2025-USD/CAD Q3
Scotiabank* 1.3600 1.3400
BMO 1.3600 1.3500
CIBC 1.3700 1.3600
TD Bank* 1.3800 1.3700
National Bank 1.3800 1.3600
*Forecast is based on last month. Does not include post Tariff moves. Forecast Table is for mid-market rates, and subject to change anytime.
