The USD eases, oil prices weaken, equities decline, and U.S. yields are mixed as markets scale back expectations for central bank rate hikes and reassess AI-driven valuations. The U.S. dollar eases in early trading as investors take profits following its recent rally and scale back expectations for further Federal Reserve rate hikes after yesterday's inflation data. Despite the pullback, the greenback remains near one-year highs, supported by resilient U.S. economic fundamentals. Global equity markets are softer as investors take profits following the recent AI-driven rally, with technology shares under pressure amid ongoing valuation concerns. Attention is turning to whether strong corporate earnings can continue to justify elevated AI-related valuations, while investors await further economic data for direction. U.S. futures are little changed as markets assess the outlook for growth, inflation, and central bank policy. Elsewhere, oil prices continue to weaken, holding below pre-war levels as easing supply concerns and progress in Middle East diplomacy weigh on crude. Gold prices are rebounding while Bitcoin extends its recovery amid improving broader market sentiment. Today sees a lighter economic calendar, with investors focusing on the US Michigan Consumer Sentiment Index, and the UoM 1 & 5 year Consumer Inflation Expectations, alongside speakers from the ECB and Fed for direction.
News Headlines. Volkswagen to axe up to 100,000 jobs in sweeping cost-cutting drive. Brutal nights and humidity mark Europe's record June temperatures. Kevin Warsh's tough talk on inflation reassures investors. Attack in Strait of Hormuz halts evacuation plan for stranded ships. SpaceX bond sale signals markets are in 'bubble territory', warns Allianz CIO. Global markets fall as investors fret about AI demand. The UK had its warmest night on record in June. Canada and Japan consider critical minerals joint stockpiling in the hunt for China alternatives. Bank of Canada consultants back 2% inflation target, flag affordability concerns.
In currency markets. Against the USD, currency markets are rebounding in early trading as the U.S. dollar eases following its recent rally, with investors taking profits after U.S. inflation data tempered expectations for further Federal Reserve rate hikes. The Japanese yen remains close to 40-year lows against the dollar, with markets continuing to monitor the risk of official intervention by Japanese authorities.
In currency markets. Oil -3.66% | Nat Gas +1.65% | Gold +0.43% | Silver -0.10% | Copper +0.20% | Palladium +1.45% | Coffee -0.94% | Cocoa -0.8% | Soybeans -0.7%
CAD firms off recent 14-month lows as the U.S. dollar gives back some of its recent gains following the latest U.S. inflation data. A modest rebound in oil prices and stronger Canadian payroll figures have also helped stabilize the loonie after seven straight days of declines, although broader sentiment remains cautious as markets continue to monitor commodity prices and U.S. trade developments.
EURCAD edges higher in early trading as the euro finds modest support while ongoing weakness in oil prices continues to weigh on the commodity-linked Canadian dollar. The broader bias remains for further EUR/CAD gains as softer energy prices and diverging policy expectations are expected to keep the loonie on the defensive.
EUR edges higher in early trading as the U.S. dollar eases following its recent rally, although gains remain limited by softer ECB rate expectations, with falling oil prices reducing inflation concerns. Markets are no longer fully pricing a further 25bp ECB rate hike in 2026, as lower energy prices and easing inflation expectations have reduced pressure on policymakers to tighten policy further. As a result, the euro is likely to remain driven by shifts in U.S. dollar sentiment and relative monetary policy expectations.
GBPEUR eases in early trading as lower oil prices provide modest support for the euro, while investors await greater clarity on the UK's political transition under a new Labour leader. While sterling has lost some recent momentum, ongoing weakness in the Eurozone economy and softer ECB rate expectations are likely to limit downside in the cross.
GBP stabilizes above 1.3200 in early trading as a modest pullback in the U.S. dollar offers some support to sterling following its recent decline. However, ongoing UK political uncertainty and expectations that U.S. interest rates will remain higher for longer are likely to limit further gains in the pound against the dollar.
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