- Risk sentiment improves on renewed talk of Iran/US ceasefire.
- Oil prices slip from session peak
- US dollar opens mixed but inches higher in early trading
USDCAD open: 1.3851, overnight range 1.3832-1.3853, close 1.3841, WTI 91.06, Gold 4,530.56
The Canadian dollar was weighed down by widening Canada-US interest rate differentials which continued to favour the US dollar. Yesterday's US ISM data reinforced expectations for higher US interest rates, while last week's Canadian first-quarter GDP figures suggested the economy remains weak and is edging closer to recessionary conditions.
WTI traded in a 90.17 and 92.74 band overnight and are near USD 90.97 in early New York. Crude prices are roughly 1% below yesterday's levels as traders unwound part of Monday's geopolitical risk premium and grew more confident that US-Iran ceasefire discussions are moving in a forward. Profit-taking following the previous session's sharp rally also pressured prices, although conflicting statements from Iranian officials helped prevent a deeper decline.
FX markets were quiet overnight despite a steady stream of headlines surrounding developments in the Middle East and Russia's latest attacks on civilian infrastructure in Kyiv and other major Ukrainian cities. The US dollar is little changed and mixed in early New York trading.
Yesterday's US ISM Manufacturing PMI rose to 54.0 from 53.7 in April, reinforcing the view that the US economy remains resilient and does not require support from Federal Reserve rate cuts. Treasury yields climbed following the report, providing additional support for the greenback.
Today's April JOLTS Job Openings report is expected to show little change, with forecasts calling for 6.82 million openings compared with 6.866 million in March.
In Asia, Chinese equities outperformed the rest of the region. Hong Kong's Hang Seng Index surged 2.52% to 26,038.32 as Tencent moved closer to receiving approval for AI integration within WeChat. Japan's Topix declined 0.42%, while Australia's ASX 200 finished the session little changed.
As of 7:00 a.m., European equity markets are broadly higher, led by Germany's DAX, which has gained 0.95%. France's CAC 40 has advanced 0.74%, while the UK's FTSE 100 is up 0.35%. S&P 500 futures are down 0.18%, the 10-year Treasury yield is 4.423%, and DXY is 99.12.
EURUSD traded in a 1.1629-1.1653 range and recovered yesterday's losses as persistent inflation pressures supported the single currency.
Eurozone inflation accelerated to 3.2% y/y in May from 3.0% in April, bolstering expectations for an ECB rate increase on June 11. The euro also drew support after a European Parliament committee voted to accept the US-EU trade agreement. Under the proposal, the EU would remove tariffs on US industrial goods and grant improved access to American agricultural and seafood exports, while EU exporters would continue to face 15% US tariffs. The full European Parliament is expected to vote on the measure in the coming weeks.
GBPUSD bounced in a 1.3451-1.3482 range and erased all of yesterday's post-ISM losses while moving back toward resistance near 1.3510. Sterling benefited from softer US Treasury yields and stable gilt markets. Additional support came from UK mortgage approvals, which rose to 65.9k and exceeded expectations, suggesting the economy remains more resilient than previously thought. The absence of fresh political concerns has also improved sentiment toward the pound.
USDJPY was steady in a 159.59-159.75 range and remained supported by yesterday's stronger ISM report and the accompanying rise in Treasury yields, which widened the spread between US and Japanese government bond yields. Higher oil prices provided an additional tailwind. However, gains were limited by concerns that Japanese authorities could intervene again should the pair move decisively above the 160.00 level.
AUDUSD chopped a 0.7153-0.7187 range and weathered the initial selling pressure following the US data release before rebounding alongside gains in technology and AI-related shares. Improved risk sentiment helped underpin the currency. AUDUSD also found support after RBA board member Ian Harper warned that long-term inflation expectations have risen, reinforcing the case for a cautious policy stance.
