- Trump announces pause in Iran attacks.
- Oil prices slide
- USD retreats against the G-10 majors as risk sentiment improves.
USDCAD open: 1.4116, overnight range 1.4108-1.4129, close 1.4123, WTI 80.74, Gold 4,022.16
The Canadian dollar drifted lower overnight due to softer crude prices and widen Canada-US 2- and 10-year interest rate spreads. Traders are focused on Wednesday's FOMC outcome, with some worried that Chair Warsh may lean hawkish as a way of demonstrating "independence" from Trump. That may be a mistake and due to analysts expecting Warsh to lean on Powell-era inflation models and metrics.
However, other models like the Cleveland Fed's Median PCE inflation gauge and the Dallas Fed's Trimmed Mean PCE suggest inflation pressure is less severe than the standard metric implies.
WTI crude consolidated recent losses within a 79.81-82.42 range, ticking up from the lows partly on speculation that Saudi Arabia is considering raising prices to offset higher shipping costs.
The greenback is trading with a bid ahead of Wednesday's FOMC decision. Traders are more worried about a hawkish outcome than the risk of renewed hostilities between the US and Iran. The US dollar index sat near 101.61, reflecting that unease.
Asian equities finished mixed. Japan's Topix dropped 2.582%, while Hong Kong's Hang Seng gained 0.41% and Australia's ASX 200 added 0.61%.
As of 7:20 am, the UK FTSE 100 is up 0.41% , the German Dax has gained 0.28% and the French CAC-40 is up 0.18%. S&P 500 futures are down 0.14%, the 10-year Treasury yield is 4.61t%, and the DXY is 101.61.
EURUSD slid within a 1.1355-1.1380 range, extending Monday's losses in thin trading as broad dollar demand ahead of Wednesday's Fed decision kept pressure on the pair. ECB board member Peter Kazimir signaled support for another rate increase, though the comment left little lasting mark on price action.
GBPUSD inched lower in a 1.3274-1.3305 range as softer oil prices pared back UK inflation expectations, pulling gilt yields lower in the process. The BRC Shop Price Index rose 0.9% year-over-year, undershooting both forecasts and May's 1.9% reading.
USDJPY meandered within a 163.60-163.85 range, sup[ported by the risk of higher Fed rates. Traders stayed cautious after Japanese PM Takaichi signaled the country may ease fiscal policy, starting with legislation to cut the 8% consumption tax on food.
AUDUSD pulled back within a 0.6963-0.6999 range partly because they thought RBA Governor Michele Bullock's speech as dovish She suggested that policymakers see less urgency to raise rates in the near term.
Today's US data slate includes the Case-Shiller Housing Price Index, wholesale inventories and consumer sentiment.
