- Iran says Strait of Hormuz is closed and oil prices surge
- US/Iran ceasefire expires Wednesday. Renewal in question
- The US dollar trading with modest risk aversion bid.
USDCAD open: 1.3692 overnight range 1.3681-1.3710, close 1.3694, WTI 87.56, Gold 4792.07.
The Canadian dollar drifted quietly as it consolidated recent gains with FX traders shrugging off the latest Middle East drama. Iran claims the Strait of Hormuz is closed after the US seized an Iranian vessel.
Prime Minister Mark Carney, buoyed by a majority government, warned Canadians that the country’s relationship with the US, once a strength, is now a vulnerability.
WTI traded from Fridays low of 79.34 to 87.38 in NY today, a 5.79% jump because of renewed hostilities and the reported closure of the Strait of Hormuz drove prices higher. Conflicting signals between Washington and Tehran are fuelling doubts about whether any agreement will hold beyond the near term.
Monetary policy remains tethered to these developments. Rate expectations are being shaped by inflation risks tied to energy prices and the potential economic fallout from prolonged conflict. Fed Governor Christopher Waller struck a cautious tone, indicating that a combination of softening labour conditions and persistent inflation could justify holding rates steady rather than easing.
FX markets reflected the indecision, with traders largely sidelined and the US dollar opening little changed in New York.
Equity markets painted a mixed picture. Asian indices closed higher, led by gains in Japan and Hong Kong, while Australia lagged.
As of 7:30 am, the German DAX is down 1.37%, the French CAC 40 has fallen by 1.10%, and the UK FTSE 100 has dropped 0.71%. S&P 500 futures are down 0.53%, the 10-year Treasury yield is 4.266%, and the DXY is 98.18.
EURUSD traded in a 1.1729–1.1772 range, dipping at the Asia open before grinding higher into the New York session in thin conditions. ECB commentary leaned cautious, suggesting patience on rate hikes while acknowledging that market pricing is not unreasonable. Weak German producer price data failed to move the needle, while higher oil prices helped cap euro gains.
GBPUSD climbs in 1.3476–1.3519 range, falling early before recovering toward the top of the band. The initial pressure came from Middle East headlines and ongoing domestic political noise, while housing data offered modest support without shifting the broader narrative.
USDJPY traded choppily in a 158.73–159.20 band, with early weakness reversing as oil prices rebounded and expectations for near-term Bank of Japan tightening eased. Additional distraction came from seismic activity off Japan’s northern coast, which may have tempered local market focus.
AUDUSD dropped then bounced in a 0.7117–0.7176 range, holding near session highs as traders looked through geopolitical noise. The currency continues to find support from a relatively hawkish Reserve Bank of Australia outlook.
Canada CPI is expected to rise 2.5% y/y compared to 1.8% which will be due to the surge in oil prices. Later on, the Bank of Canada Business Outlook Survey is released.
