With the fog of war still shrouding the near-term outlook, the is mostly consolidating with a softer bias against the G10 currencies. Outside of the that is still basking in yesterday’s , and the , which is slightly softer, the other G10 currencies are up less than 0.15% ahead of the North American open. August and September are trading within yesterday’s ranges.
The released yesterday failed to tell the market anything it did not already know. Fed officials are divided, which had already been revealed in the “dot plot” that saw nine of the 18 members indicate that they thought at least one hike this year would be appropriate. The UK’s Labour leadership contest formally begins today, though there seems to be little doubt of the outcome. French politics are also in flux after Le Pen says she will run for president next year. Lastly, undeterred by slightly slower consumer inflation, the PBOC set the dollar’s reference rate at a new three-year low.
Prices
G10
• The fell to a four-day low in North America yesterday (~$1.1390) but recovered in the North American afternoon to new session highs, slightly above $1.1430. It has risen to almost $1.1450 today but continues to consolidate in the range set last Thursday, when the US employment report was released. That range was about: $1.1375-$1.1475. The 20-day moving average is about $1.1445, and the single currency has not settled above it since the day before the June 17 FOMC outcome.
• The is consolidating near the 40-year low set last week. The US dollar reached almost JPY162.85 on July 1 and backed off after the employment data. And with a running start, the greenback reached almost JPY162.70 yesterday. It is trading mostly below JPY162.60 today. Options for almost $2 bln at JPY163 expire today. The US 10-year premium over JGBs narrowed to new low since March 2022 around 162 bp on Monday and has stabilized in recent days. It was nearly 200 bp as recently as late March.
• seemed unusually well bid yesterday and reached new session highs in the early NY afternoon (~$1.3410) but settled slightly below $1.3390. Quietly, sterling has advanced in nine of the past 10 sessions. It reached $1.3430 today, its best level June 17 (Fed’s hawkish hold). It has pushed above the 200-day moving average ($1.3400). It has not closed above it since June 16. Nearby resistance is seen in the $1.3440-60 area. Sterling is also outperforming the euro there may be scope toward GBP0.84 initially (~1.5%). Sterling has shown little interest in Labour’s leadership contest that formally starts today.
• For the first time in a couple of months, the Canadian dollar is showing some life. From early May through late June, it fell by about 5.2% against the US dollar. The greenback reached almost CAD1.4250, which it tried twice to overcome and has been rebuffed. It posted its lowest close in nearly two-and-a-half weeks yesterday. The CAD1.4150 area, which was approached yesterday and is holding. It is fraying the 20-day moving average (~CAD1.4155 today). The US dollar has not settled below it since May 7. Below there, the CAD1.4100-10 area may be the next area of chart support.
• The broke down to a four-day low yesterday, a little above $0.6905. It recovered and reached almost $0.6940 in the North American afternoon. It has edged a little higher today. Initial resistance is seen near this week’s high (~$0.6960) and the 20-day moving average is a couple of hundredths of a cent lower. It has not settled above it since the end of May. The $0.7000 may offer the next important target.
EM
• The has fallen by about 1.15% against the dollar in the past two sessions. That is almost half of the year’s carry (one-year rate differential is around 280 bp). The dollar settled near MXN17.39 on Monday and reached almost MXN17.6450 yesterday amid the risk-off mood. It pulled back but posted its highest settlement since June 24, which was also above last week’s intraday high. The greenback is consolidating between MXN17.5280-MXN17.5835 today. Support is pegged in the MXN17.4750-MXN17.50 area.
• The dollar briefly pushed above CNH6.81 against the yesterday, a new high in nearly two weeks. Last month’s high was almost CNH6.82. The dollar has pulled back to about CNH6.7970 today. The PBOC set the dollar’s reference rate a little lower today but at CNY6.0836, (from CNY6.0877 yesterday), it was sufficient to mark a new three-year low.
• After falling by around 0.6% yesterday, the steadied today and recovered above a third of yesterday’s decline. The new facility launched last month to attract foreign deposits reportedly has raised $1.5 bln. The program offers high interest rates (~7.5% in some cases) as the central bank is subsidizing the program. After peaking near INR95.6085 yesterday, the dollar eased to about INR95.2815 today.
Other Markets
• The recovery of the Nasdaq yesterday from early losses of more than 1% may have been seen as a signal by bargain hunters in some of the beaten-up Asia equity names. Most of the large Asian bourses advanced today. Hong Kong, Taiwan, and Australia were notable exceptions. China’s CSI 300 led with a 2.5% gain. Europe’s Stoxx 600 is trying to snap a three-day slide. It is up about 0.2% in late European morning turnover. The S&P and Nasdaq futures are firmer.
• The US 10-year yield spent most of the last few sessions of June below 4.40% and yesterday approached 4.60%. It is back to late May levels, when it peaked so far for the year a little below 4.70%. The yield is near 4.57% now. Yesterday’s surge in European bond yields seemed overdone. Yields are 2-4 bp lower today. However, there is a drama playing out in France on two fronts, the current budget projections, and the next year’s presidential contest. The French premium, reached around 85 bp, is the highest in nearly nine months, but it slightly below 80 bp now.
• recovered from a brief drip below $4022 near midday in NY yesterday but stalled a little below $4090. It is trading with a firmer bias today and reached almost $4118. The five- and 20-day moving averages are converging in the $4125-35 area. Silver was sold to almost $57.20 yesterday and its rebound held below $59. It also enjoys a firmer tone but has held below $60.
• August WTI has rallied more than 10% in the past two sessions. It reached almost $76.10 yesterday, roughly a two-week high. It traded above the 20-day moving average (~$75) for the first time since June 11. It is consolidating today, awaiting fresh developments, between about $72.35 and $75.15. Speculators in the futures market had amassed their large gross short crude oil futures contracts since 2017 in mid-June (~236.5k contracts, 1k barrels per) and had already shaved in in the past two reporting weeks through June 30, but it was still large before the recent escalation.
Data
• US existing home sales may have risen for the third consecutive month in June and may have risen by a cumulative 5% in Q2 after falling by about 6% in Q1. If the median forecast in Bloomberg’s survey is fair, that 4.20 mln seasonally adjusted annual pace would still be lower than the 4.27mln pace in December 2025. Still, the monthly average in H1 looks to be about 4.10 mln unit pace, which is slightly better than the H1 25 pace (4.05 mln). Weekly jobless claims are also due and may be skewed by last week’s holiday. The four-week average is about 222k after falling from the H1 26 high of 224.5k the previous week.
• Mexico is expected to report slight declines in the year-over-year CPI measures today. The headline rate is projected to fall toward 3.50% from 3.94% in May. Last year’s low print was 3.51% in July. Mexico’s inflation has not been below 3.50% since the end of 2020. The core rate is stickier. The median forecast in Bloomberg’s survey is for a slight softening to 4.10% from 4.19% in May. Banxico will also release the minutes from its recent meeting when the key rate was left unchanged at 6.5%.
• Germany reported a larger than expected May trade surplus of 19.1 bln on adjusted basis. The median forecast in Bloomberg’s survey was for a 14.8 bln euro surplus. Exports were stronger than anticipated. They increased by 0.9%. But it was the 2.5% drop in imports that was responsible for the bulk of widening of the surplus. The monthly surplus averaged about 17.7 bln euros this year, down slightly from 17.9 bln average in the first five months of 2025. The Bundesbank forecasts that the current account surplus will ease to 4.1% of GDP this year from 4.5% in 2025.
• China’s June inflation gauges were little changed. Producer prices, which emerged from a 3.5-year deflationary period in March, have now risen 4.1% year-over-year, the highest since July 2022. The consumer price index ticked down to 1.0% from 1.2% year-over-year, while the core rate was steady at 1.1%. China’s consumer prices fell for the second consecutive month (-0.3% after -0.1% in May). While no doubt demand can be stronger, the biggest drag comes from food prices. They are off 1.6% year-over-year. Non-food prices have risen by 1.5%. The core measure is up 1%.
