The USD steadies, oil prices strengthen, equity markets are down, and US yields rise amid the ongoing Israel-Iran conflict. The USD index and currency markets are sidelined amid the ongoing Middle East tensions and caution ahead of today's US Retail Sales. US futures and global equities come under fresh selling pressure as risk sentiment fades after President Trump cut short his G7 visit and said his return to Washington "has nothing to do with" a ceasefire. Investors' caution is increasing with the concern that Tehran could attempt to disrupt oil shipments through the Straits of Hormuz, a gateway for about the fifth of the world's daily output. "The degree of uncertainty is very high," said Lamagnere, head of development at AlphaValue. "So far, the market hasn't captured an escalation of the conflict. Now we're sailing in the fog." Elsewhere, oil prices rose over 1%, bringing gains in the last week to nearly 10% amid output concerns. Bitcoin prices tumbled 2% to $106k, gold prices eased, while silver prices firmed in early trading. Today's focus will be on US retail sales, ahead of Wednesday's key Federal Reserve interest rate decision.
In other news. Trump exited the G7 summit and warned of the intensification of the Israel-Iran conflict. The G7 expressed support for Israel and called Iran a source of instability. The IEA says world oil demand will keep growing this decade despite the 2027 China peak. The BoJ will slow the pace of bond tapering next year as fresh risks emerge and keep interest rates on hold at 0.5%. The EU spurns economic dialogue with China over deepening trade rift. Iran will only agree to talks to end the Middle East crisis if Israel stops bombing. Canada and the US set a 30-day deadline to strike a trade deal.
In currency markets. The JPY holds steady after the BoJ kept interest rates on hold. Currency markets are trading within tight trading ranges as investors await Wednesday's Fed rate decision and Fed Chair Powell's comments. CNY & Asian currencies are down 0.1% on average against the USD. Trading currency markets are mixed, with MXN & ZAR easing 0.2%, JPY down 0.1%. KWD, SEK, DKK & NOK flat, CHF up 0.1%, and NZD & AUD up 0.25% against the USD.
In commodity markets. Oil & Natural Gas prices rallied 1.35%. Gold prices fell 0.4%. Silver and Wheat prices strengthened by 0.65%. Copper prices weakened 0.55%, and Soybean prices are flat.
CAD continues to linger around eight-month highs against the USD amid optimism of a US/Canada day trade deal following Trump/Carney G7 comments, and continuing strengthening oil prices. From the G7, President Trump and Prime Minister Carney have commented that they expect to sign a new trade deal within 30 days, signalling a potential end to the ongoing trade war. Today's focus will be on the US retail sales, with markets expected to remain cautious ahead of Wednesday's Fed interest rate decision and the BoC's Governor's speech to provide direction to the loonie.
EURCAD is sidelined as improving CAD optimism and stronger oil prices were offset by stronger-than-expected German and EU economic sentiment reports.
EUR steadies above 1.1550 after positive German and EU ZEW data. The euro is sidelined with investors cautious amid the escalating Iran-Israel conflict, and markets are focused on the Fed interest rate decision on Wednesday. Domestically, the German and the EU ZEW Survey - Economic sentiment in June significantly beat expectations. ECB policymaker Stouraras told Greek media on Tuesday that the ECB has reached a point of equilibrium and added that any further rate cuts will depend on data. Intraday, the US retail sales will be the primary driver for the single currency.
GBPEUR eases after the better-than-expected EU ZEW report, and caution ahead of Thursday's BoE interest rate decision.
GBP continues to be under pressure ahead of the US data. Investors remain cautious ahead of Wednesday's UK inflation report and Thursday's Bank of England interest rate decision. On the trade front, President Trump and Prime Minister Starmer signed the US-UK trade deal at the G7 summit in Canada. Focus will be on today's US retail sales, but we expect markets to remain within a tight trading range ahead of Wednesday's UK inflation report and the Fed's interest rate decision.
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