Today's expected range for the Canadian Dollar against the major currencies:
US Dollar 1.3960-1.4210
Euro 1.5940-1.6190
Sterling 1.8690-1.8940
WTI Oil (opening level) $84.74
The CAD/USD is opening at 1.4084 ( 0.7100 )
The Australian dollar was the standout on Monday, rising 0.45% to 0.6998 on oil and commodity-linked demand. The New Zealand dollar advanced again overnight after the hotter second-quarter inflation print firmed expectations for further RBNZ tightening, having closed Monday at 0.5838.
The Canadian dollar was the worst G10 performer on Monday, weakening 0.38% despite higher oil prices, then weakend again after the US vowed a fresh 50% tariff on selected Canadian goods.
Sterling closed at 1.3431 under pressure from the gilt selloff and the wider UK to US yield spread, and held those declines after the Chancellor appointment.
The yen stayed weak around 162.47 per dollar, with elevated oil import costs continuing to weigh on Japan's terms of trade.
That is why you see the US Index above 101 again
Headlines
· US strikes on Iran entered a tenth day as Tehran continued to retaliate and traffic through the Strait of Hormuz slumped following attacks on shipping. President Trump warned that Iran would be held responsible for the deaths of three US service members. Iran-backed Houthis declared a maritime embargo on Saudi Arabia, putting Red Sea energy flows at risk, while mediators floated de-escalation plans including a possible ten-day halt to strikes. Iran confirmed it was in contact with mediators, and that report was enough to take some heat out of crude overnight.
· New Zealand's annual inflation rose to 4.1% in the second quarter from 3.1% in the first, above forecasts and well outside the RBNZ's 1 to 3% target band. Transport was the main driver as fuel prices surged, followed by housing and utilities. On the quarter, CPI climbed 1.5%, the fastest pace since the third quarter of 2023.
· Canada moved the other way. Headline inflation eased to 2.8% in June from 3.2% in May, just under the 2.9% consensus, on slower gasoline and softer food prices. The Bank of Canada's core measures, median at 1.9% and trimmed-mean at 1.8%, fell to their lowest in more than five years. On the month CPI declined 0.4%, led by a 10.2% drop in gasoline. Separately, the Trump administration imposed a 50% tariff on selected Canadian goods including milk, beer, plywood and hockey equipment, citing discriminatory treatment of US products. Energy, potash and critical minerals are exempt. Prime Minister Carney said the move violates the USMCA and that Canada is ready to intensify talks.
· In the UK, new Prime Minister Andy Burnham said he would use any flexibility available in the fiscal rules, a comment that unnerved gilt investors and triggered a sovereign bond selloff that spread to Treasuries and JGBs. He then named former Defence Secretary John Healey as Chancellor of the Exchequer, an appointment reported as a surprise and one the gilt market had not positioned for.
· Euro area construction output rose 1.2% year-on-year in May, a seven-month high, driven by a 2.9% jump in specialised construction. Civil engineering growth eased to 3.5% while building construction fell 6.6%. Austria, Germany and Poland led the gains. On the month, output rose 0.4%.
Key Points
· Equities: US and Europe slipped on geopolitical and rate concerns, while Asian technology shares staged a sharp rebound.
· Volatility: VIX held above 18 as front-end calm returned, while oil vol stayed roughly three times equity vol
· Digital Assets: Miners and crypto equities snapped back hard, Strategy paused its bitcoin buying
· Commodities: Oil eased from one-month highs as mediation talk built, gold pushed back above 4,000
· Fixed Income: A gilt-led selloff dragged Treasury yields higher, with the 10-year steady overnight at 4.59%
· Currencies: Dollar little changed, the New Zealand dollar firm on hot inflation, the loonie steady into fresh US tariffs