- Market focus shifts to tariffs, interest rates and Fed Powell’s testimony.
- Middle East tensions ease-oil prices steady
- US dollar opens little changed from yesterday’s close.
USDCAD: open 1.3730, overnight range 1.3708-1.3738, close 1.3725, WTI 65.04, Gold 3325.41
The Canadian dollar traded sideways in a quiet overnight session. Traders are waiting fresh catalysts and looking ahead to Friday’s April GDP data. Yesterday’s Canadian inflation numbers did not do anything to inspire the Bank of Canada to cut interest rates.
Crude prices stabilized after recent weakness, with WTI moving between 64.79 and 65.76. Weekly API inventory data showed U.S. crude stocks fell by 4.277 million barrels. Despite sanctions, Iran continues to export oil using a so-called “shadow fleet.” Trump seemingly validated the workaround by commenting that China may still buy Iranian crude.
Negative sentiment linked to the Iran-Israel conflict has faded, prompting traders to refocus on tariff risks, Fed policy direction, and key economic indicators. Markets largely shrugged off Chair Powell’s latest testimony, which echoed his recent press conference: the Fed remains in data-dependent mode. His message was echoed by several other officials, including Governor Michael Barr who said policy is appropriately positioned for a wait-and-see approach. Boston’s Susan Collins reaffirmed the need for the current stance, and Mr. Neel Kashkari noted that more clarity on inflation is required before considering rate cuts.
Equity market performance was mixed overnight. Asian indexes were flat, apart from Hong Kong’s Hang Seng, which gained 1.23%. Japan’s Topix and Australia’s ASX 200 ended little changed. In Europe, sentiment was slightly cautious with the DAX down 0.40%, the CAC 40 off 0.22%, and the FTSE 100 flat. S&P 500 futures hovered near unchanged. The 10-year U.S. Treasury yield held at 4.30%.
EURUSD traded in a 1.1591–1.1631 range, failing to extend gains from the prior session. Buyers stepped back as uncertainty around EU-U.S. trade relations and the potential for European retaliation over tariffs weighed on sentiment.
GBPUSD moved sideways within a narrow 1.3604–1.3634 range. Momentum from the ceasefire rally is fading, and a fresh report warned that UK growth could reverse due to Trump’s tariffs and looming tax hikes.
USDJPY climbed in a 144.61–145.66 band and is testing the top in early New York trading. The unwind of safe-haven yen flows continued as Middle East risks ebbed. Meanwhile, the BoJ’s latest policy summary revealed internal divisions over the path of future rate hikes, especially in light of potential trade-related uncertainty.
AUDUSD traded between 0.6488 and 0.6508, supported by general dollar softness. However, weaker-than-expected inflation (2.2% y/y vs 2.3% forecast and 2.4% prior) limited upside and firmed up expectations that the RBA may cut rates by 25 bps at its July 8 meeting.
The only data of note is US home sales.
