The USD eases, oil prices weaken, equity markets are up, and US yields are mixed, with the Middle East and Central Banks in focus. The USD eases in early trading despite the increasing fear that Israel-Iran fighting could spill over into a regional conflict. Investors will also focus on the Fed, BoE and BoJ's interest rate decisions this week. US futures rose, and global equities rose in early trading, recouping some of Friday's losses, with investors cautiously optimistic that the conflict is unlikely to draw in more parties. "The situation in the Middle East is not making the market shake, and it's likely it will stay that way as long as there is no major escalation," said Artaz at La Financiere de L'Echiquier. "Markets are riding strong momentum. The mood overall is still very much about buying the dip." Elsewhere, oil prices ease on day four of the Israel-Iran crisis as the conflict remains contained between the two countries. This week's focus is Monday's G7 Meeting and the NY Empire State Manufacturing Index. Tuesday, the BoJ Interest Rate Decision, and the US Retail Sales. Wednesday, UK CPI, BoC Governor Macklem Speech, the Fed Interest Rate Decision. Thursday, Swiss National Bank rate decision, BoE Interest Rate decision. Friday, UK Retail Sales, CAD Retail Sales, US Philly Fed Manufacturing Survey and EU Consumer Confidence will help guide currency markets this week.
In the news. Israel and Iran continue trade attacks for a fourth day. China's retail sales jump while industrial growth slows due to trade war turmoil. The EU plans a ban on new Russian gas contracts using trade law. A survey found that the US is no longer a top growth region for UK manufacturers. Israel is furious as France shuts four weapons stands at the Paris Airshow. Trump returns to the G7 he once loathed as the Iran crisis intensifies. Canada and the UK think and work alike, Starmer says during Ottawa visit. Taiwan blacklists China's Huawei and SMIC, further aligning with the US trade policy. Trump administration weighs adding 36 countries to travel ban.
In currency markets, The USD index eases as currency markets rebound, as optimism grows that the Iran-Israel crisis is unlikely to expand to other countries. CNY is flat, while Asian currencies on average rise 0.15% against the USD. Trading currencies are mixed, with CHF, SEK & NOK down 0.25%, JPY eased 0.1%, KWD up 0.1%, DKK & CZK firmed 0.25%, MXN gained 0.4%, AUD & NZD strengthened by 0.5%, and ZAR rallied 0.8% against the USD.
In commodity markets. Oil prices weakened by 0.75%. Natural Gas prices rallied by 3%. Gold prices eased by 0.6%. Silver prices firmed by 0.2%. Copper prices slipped by 0.3%. Wheat prices tumbled by 1.2%, and Soybean prices are flat.
CAD remained flat, holding near eight-month highs against the USD. Weakening oil prices and expectations of the Fed keeping rates on hold capped the loonie's ability to strengthen. Last week, BoC Deputy Governor Kozicki stuck to the bank's messaging that further cuts would follow if inflation continued to ease. Still, bank policy decisions will be taken one meeting at a time. This week, investors will continue to monitor the Iran-Israel conflict for its impact on commodity prices, possible Trump/Carney trade comments as they meet at the G7, and the Fed's rate decision to provide direction this week.
EURCAD firmed as weakening oil and gold prices kept pressure on the loonie.
EUR presses through 1.1550 amid improving risk sentiment. Investor risk sentiment improved as the Israel/Iran conflict remained contained, with focus shifting to the Fed's interest rate decision on Wednesday. Markets anticipate that the Fed will keep rates on hold but may signal room to ease rates in Q3. At the same time, the ECB has adopted a more hawkish stance, which helps to provide support. With the absence of high-tier economic data releases, investors will monitor the G7 meeting and the Iran/Israel updates to help provide intraday direction to markets.
GBPEUR holds steady with markets focused on the UK CPI and the BoE interest rate decision this week to help provide direction to the currency pair.
GBP retests 1.3600 as the USD softens in early trading. The pound advances as investors exit safe-haven currencies despite Israel/Iran being no closer to a settlement. Investors will be focused on a busy week of US data releases, the UK inflation report, the UK Retail Sales report, and the Federal Reserve and Bank of England interest rate decisions. The Bank of England is expected to keep interest rates steady this week despite a slower UK jobs market. Intraday, we expect markets to hold within the current range, but if the US Empire State Manufacturing Index prints outside of expectations, it could impact the USD.
Payments International Inc., payment and foreign currency exchange services are provided by Ebury Partners Canada Limited. Payments International Inc. is partnered with Ebury Partners Canada Limited as a Programme Manager. "Ebury Partners Canada is registered as Money Services Business (“MSB”) with the Financial Transactions and Reports Analysis Centre (“FINTRAC”) (Reg. No.: M17949017) and licensed as an MSB with the Authorité des Marchés Financiers (“AMF”) (Licence No. 904066)".
