- US/Iran flare-up stokes risk aversion.
- Key US core PCE Price index numbers due today
- US dollar catches a safe-haven bid and rises across the board
USDCAD open: 1.3866, overnight range 1.3837-1.3870, close 1.3841, WTI 90.32, Gold 4,393.07
The Canadian dollar retreated due to a wave of safe haven demand for US dollars amid mounting Iran/U.S. tensions. However, geopolitical nerves were only part of the story. The Canadian dollar also remained under pressure from deteriorating Canada/U.S. trade relations and renewed noise surrounding Alberta separatist sentiment.
Commodity weakness added to the loonie’s woes. Gold prices have fallen 3.21% over the past five sessions as expectations for higher-for-longer U.S. interest rates boosted the greenback and reduced demand for bullion.
WTI crude traded erratically within an 89.37-92.51 band as traders reacted to every Iran/U.S. headline crossing the wires. Even so, losses were cushioned by another sizeable draw in U.S. crude stockpiles. Inventories fell by 2.8 million barrels following the previous week’s sharp 9.1 million barrel decline.
The US dollar opened in New York with broad gains as risk aversion gripped markets after the Iran/US ceasefire appear to have unravelled overnight. It didn’t. It is just a hiccup.
Asian equity markets retreated across the board. Australia's ASX 200 shed 1.43%, Hong Kong's Hang Seng gave back 1.27%, and Japan's Topix slipped 0.41%.
As of 7: 20 am, European markets were under pressure. The FTSE 100 fell 1.15%, the German DAX lost 0.53%, and the French CAC 40 declined 0.47%. S&P 500 futures were off 0.27%, the 10-year Treasury yield is 4.497%, and the DXY sits at 99.38.
EURUSD traded in a 1.1586-1.1632 range. The single currency found a floor when risk aversion from the Iran/US escalation peaked. EURUSD is supported by expectations for an ECB rate hike on June 11. Eurozone economic and consumer confidence readings were largely unchanged.
GBPUSD dipped then climbed in a 1.3367-1.3431 band. The currency pair was sold off on safe-haven dollar demand before recovering a portion of the decline as the latest exchange of hostilities appeared to be a bump rather than a breakdown in ceasefire negotiations. Sterling found additional relief as UK political uncertainty receded from the headlines.
USDJPY traded narrowly in a 159.38-159.65 range, climbing in Asia before giving back gains in Europe. Safe-haven dollar buying and elevated oil prices supported the pair while the prospect of Bank of Japan intervention kept a lid on further gains.
AUDUSD chopped between 0.7098 and 0.7145, weakening in Asia before recovering through the European session. The initial leg lower reflected the Iran/US flare-up, with the rebound following as tensions showed signs of easing. The recovery remains capped by reduced expectations for a further RBA rate hike after the most recent inflation print disappointed to the downside.
Today’s US data includes April core PCE price index data is expected to edge higher to 3.3% from 3.2% year-over-year. Weekly jobless claims are seen coming in at a benign 211,000, and April Durable Goods Orders excluding transportation are projected to have risen 0.5%, down from 0.9% previously.
