The is mostly firmer today, but largely within the well-worn ranges seen recently against most of the G10 currencies. The news stream is light, but the US has stepped up the strikes against Iran, and August is back around $80 a barrel. The eurozone’s May industrial output unexpectedly fell, while Japan May industrial output was revised lower but activity in the service sector improved. China’s Q2 GDP disappointed, though June retail sales and industrial output were firmer than expected.
Earlier this month, the US reported disappointing jobs growth in June and yesterday reported a softer-than-expected June . After Federal Reserve Governor Waller’s seemingly hawkish comments on Monday, there was increased speculation of a as early as this month’s FOMC meeting. After the CPI, the odds were more than halved. Fed Chair Warsh maintained his hawkish line and commitment to bring inflation down in his testimony before Congress yesterday. He returns to testify before the Banking Committee today. The questions will differ, but the answers will remain the same.
Prices
G10
• On July 2, the recovered from $1.1375 to $1.1475 after the disappointing US June employment data and has remained in that range ever since. With the help of a softer than expected US CPI, the euro moved from the lower end of the range to the upper end. Yesterday’s favorable price action was marred by the euro’s inability to settle above Monday’s high (~$1.1445) and the 20-day moving average (~$1.1415 today). So far today, it is trading in a narrow range. The euro has held below yesterday’s high and was sold to almost $1.1410 late in the European morning. Options for about 845 mln euros at $1.1420 expire today.
• Yesterday, the dollar was mostly confined to Monday’s range against the . The dollar was confined to about a 40-tick range on both sides of JPY162.00. It is inside that range today but looks poised to push above yesterday’s high. The 40-year high was recorded on July 1 near JPY162.85. Finance Minister Katayama seems to be determined to boost domestic demand for Japanese bonds, as higher yields do not seem sufficient (yet)
• traded in about a cent-range yesterday between about $1.3340 and $1.3445. It stalled in front of last Friday’s high ($1.3450). It settled firmer on the day but below $1.3400. It is in about a 20-tick range on both sides of $1.3400 today, where options for about GBP640 mln expire today, but looks set to extend the range to the downside. The euro fell for nine of the past ten sessions coming into this week against the euro but recorded its first back-to-back gain in nearly a month. It is little changed today.
• The rose by almost 0.70% yesterday, its best day since the end of April. The US two-year premium that trended higher in May and June, which the exchange rate tracked, has fallen by almost 10 bp since the start of the month and about half of it was recorded in response to the softer US CPI. The US dollar was sold slightly through CAD1.4050, its lowest level since June 17 (Fed Day). It slipped to CAD1.4040 today but has come back bid in the European morning and reached almost CAD1.4070. Initial resistance is seen in the CAD1.4080-CAD1.4100 area.
• The rebounded from the dip below $0.6920 and reached slightly above $0.6990 after the US soft inflation report. That is a three-week high and posted its highest settlement since June 22. It continues to press against the high today. Nearby resistance is seen in the $0.7000-$0.7020 area.
EM
• The had its best day here in July, rising by about 0.55% against the dollar and reached a five-day high yesterday. The greenback was sold and briefly traded below MXN17.39. The US dollar held above last week’s low (~MXN17.3750). It is consolidating today in a roughly MXN17.4040-MXN17.4340 range. The Brazilian real’s 1.2% gain led the emerging market currencies yesterday. The dollar settled below BRL5.10 for the first time in almost a month. Last month’s low was slightly above BRL5.0.
• The reached its best level since the day after last month’s FOMC meeting concluded. The greenback frayed support near CNH6.77 twice yesterday and dollar buyers emerged. It slipped to CNH6.7655 earlier today and reached CNH6.7775 in Europe. There may be near-term potential to CNH6.7800-20. Given the broad dollar decline yesterday, the PBOC seemed to have little choice and set the fix at a new three-year low (CNY6.7910 vs. CNY6.7990 yesterday).
• The dollar’s broad pullback yesterday and the stabilization of oil failed to deter selling. The dollar gapped higher on Monday and Tuesday, and extended the gains today to INR96.2825, its highest level since May 22. The record high was recorded on May 20 near INR96.9650.
Other Markets
• Equities are mostly firmer today. The Nasdaq led yesterday’s equity advance with a 0.90% gain. The S&P 500 gained about 0.4% to recoup almost half of Monday’s loss. Dow Industrials eked out a negligible gain. Outside of Chinese markets, which traded a little softer, the large Asia Pacific markets rallied today with South Korea’s Kospi raising 6.25% and Taiwan’s Taiex up 2%. Hong Kong and mainland companies that trade there rose 1.4% and 1.0%, respectively. Europe’s Stoxx 600 is straddling unchanged levels, while US index futures are firm.
• The rally in US bonds following the softer-than-expected CPI helped European bonds pare earlier losses yesterday. However, they have bounced back by mostly 2-3 bp today. The three-basis-point decline in the US 10-year yield was the most in about three weeks. It is 1-2 bp firmer today and back above the 4.60% mark. The US two-year yield dropped nine basis points and unwound in full Monday’s jump. Today, it is a couple of basis points firmer near 4.22%.
• It may seem counterintuitive, but gold rallied by about 1.25% yesterday after the softer-than-expected US CPI. It was the biggest rise since the July 2 disappointing US jobs data. The rally stalled within less than 50 cents of the 20-day moving average (~$4100 today). It is consolidating between about $4017 and $4062 today. Silver traded on both sides of Monday’s range but the close was well in the range, seemingly neutralizing the potential technical signal. It is softer today, mostly in a $58-$59 range but looks vulnerable to new losses.
• August WTI reached the session high yesterday, slightly above $81.25 shortly before the North American session began. It was sold to about $77.85 before midday in New York. It settled firmly albeit slightly below $80. It is trading between $79.30 and almost $81 today and is hovering near $80 in late European morning activity.
Data
• Following yesterday’s June CPI, the US reports today. A flat headline reading will allow the year-over-year rate to slip to 6.2% from 6.5%. The core measure may increase by 0.3%, which would lift the year-over-year rate to 5.2% from 4.9%. The July Empire State manufacturing survey is due at the same time and is seen rising to 9.7 from 5.7. Recall that May’s reading of 19.6 was a four-year high. Late in the session, the Fed’s Beige Book will be released.
• Ahead of the Bank of Canada’s decision (9:45 AM ET), StatCan reports June existing home sales and May manufacturing sales. The Canadian economy contracted 1.0% in Q4 25 and by 0.1% (annualized rates) in Q1 26. However, the economy appears to have returned to growth in Q2 and the median forecast in Bloomberg’s survey is for 1.9% (Atlanta Fed’s GDPNow tracker puts US growth at 1.3% in Q2). The swaps market expects the Bank of Canada to stand pat through Q3 and has a clear bias toward a hike late this year.
• The eurozone’s May industrial output was surprisingly soft. Instead of rising by 0.2% it fell by 0.2%. The sting was only slightly blunted by the upward revision in April to 0.3% from 0.1%. Recall that national figures showed better than anticipated activity in Germany and Spain (0.9% and 1.2%, respectively), while French industrial output slipped by 0.1% and Italy’s fell by 0.3%.
• Japan revised down its initial 0.5% estimate for industrial output in May to 0.1%. In the first five months of the year, Japan’s industrial production increased by a monthly average of 0.5% compared with a 0.2% average in the Jan-May 2025 period. May core machine orders tumbled 12.4% after an 8.7% increase in April. The median forecast in Bloomberg’s survey was for a 4.2% decline. On the other hand, May’s tertiary industry index (services) jumped by 1.1% (0.4% expected), though the April series was revised to a 0.8% gain from 1.3% initially. The BOJ meets at the end of the month. After last month’s hike, the swaps market sees virtually no chance of a hike, though another hike appears to be nearly fully discounted at the end of the year.
• China’s data disappointed. It reported the economy grew by 0.9% quarter-over-quarter in Q2, down from 1.3% in Q1. The year-over-year pace slowed to 4.3% from 5.0%. Still June industrial product and retail sales were stronger than expected. Retail sales from 1.0% year-over-year. It had been expected to continue to contract after the 0.6% year-over-year decline in May. Industrial output rose 5.3% year-over-year, up from 4.5% in May. On a year-to-date, year-over-year measure, retail sales slowed to 1.3% from 1.4% and industrial output was unchanged at a 5.4% pace. Fixed asset investment and property investment contracted at a faster pace. New and used house prices continued to decline. Property investment’s contraction deepened. The GDP deflator rose 1.6% in Q2 after three years are deflation readings. It appears spurred by higher energy costs and sectors linked to AI. Separately, China reported that new yuan loans and aggregate financing improved in June but not as much as economists expected. The poor economic readings will spur speculation of new stimulus measures from Beijing.
