United States
The US dollar has softened against most currency pairs today, reflecting a broad retreat in greenback strength across the G10 complex. Federal Reserve Chair Warsh has named key personnel for new task forces, with observers noting that the appointees appear highly respected and credible, bringing a diversity of experiences and political perspectives to their roles. The selection process suggests a healthy exercise in examining first principles from time to time, a signal that the new administration is taking a methodical approach to policy formation.
The US dollar index reflects this softer tone, though the greenback remains supported at key technical levels. The broad dollar weakness is not driven by Fed policy expectations but rather by external factors, particularly the yen’s recovery and technical positioning in other major pairs. Treasury yields have declined modestly, with the 10-year US Treasury yield off a couple of basis points to 4.53%, marking a three-day low for the benchmark rate. Benchmark 10-year yields fell between 4-5 basis points in the US yesterday, providing support to risk assets and contributing to the softer dollar environment.
Looking ahead, the calendar remains relatively light on major US economic data releases today. However, traders remain focused on upcoming labor market indicators and the trajectory of inflation, both critical to Fed policy deliberations. Technical talks between the US and Iran reportedly continue, adding a geopolitical dimension to market sentiment and supporting safe-haven demand in certain pockets of the market.
Eurozone
The euro has remained range-bound throughout the week, trading within a narrow $1.1375–$1.1475 corridor established on July 2. The single currency managed to push above its 20-day moving average, which sits near $1.1440 today, and rose to $1.1460 before reversing lower during the European session. The pair subsequently fell to new session lows near $1.1425, failing to sustain gains above the key moving average.
Technical weakness is evident in the euro’s inability to settle above the 20-day moving average since the eve of the June 17 hawkish hold announced by the FOMC. Yesterday’s session low came in around $1.1415, and a close below this level would weaken the technical tone considerably. A break below this support would open the door to further downside, though the pair has found some bids near the lower end of its range.
Of particular interest to options traders are 2.6 billion euros in option expiries today concentrated in the $1.1400–$1.1405 band. This cluster of strikes may provide support and influence price action as expiration approaches, potentially acting as a magnet for price discovery. The ECB’s policy stance remains accommodative relative to the Fed, which continues to weigh on the euro’s valuation and limits upside potential in the near term. Peripheral spreads have narrowed modestly as yields have declined across the eurozone, with French spreads tightening alongside other peripheral markets.
United Kingdom
Sterling continues to trade with impressive momentum, having risen for the tenth session in the past eleven trading days. The daily momentum indicators remain constructive and are not yet overextended, suggesting there may be additional room for upside movement before encountering overbought conditions. Yesterday’s close represented another strong session for cable, adding to an impressive winning streak that has captured the attention of trend-following traders.
The next technical target for sterling stands around the June 15 high of $1.3460, which also corresponds to the 61.8% Fibonacci retracement of sterling’s losses since the May Day high of approximately $1.3660. During the Asia Pacific session, cable reached slightly above $1.3450 before stalling and subsequently easing back to almost $1.3410 during the European morning. This pullback from intraday highs suggests profit-taking at resistance levels, though the overall technical structure remains positive.
Support for the pair is identified in the $1.3380–$1.3400 area, where GBP 1.37 billion in option expiries are concentrated today. This significant cluster of options at support levels may provide a floor for price action and prevent deeper pullbacks, as option sellers and buyers converge around these strikes. The Bank of England’s relatively hawkish stance compared to other central banks continues to provide underlying support for sterling’s valuation, and the positive technical momentum suggests that dip-buyers remain active in the market.
China
The Chinese yuan has strengthened significantly, with the offshore yuan reaching its best level in approximately two-and-a-half weeks near CNH 6.7785. This strength reflects the People’s Bank of China’s decision to set the dollar’s reference rate below CNY 6.80 for the first time in three years, a symbolic move that signals the central bank’s commitment to supporting the yuan and potentially limiting capital outflows.
The greenback had reached CNH 6.81 on Wednesday but found bids near CNH 6.7935 yesterday as the offshore yuan strengthened. The PBOC set the dollar’s reference rate at a fractionally new three-year low today, with the fixing coming in at CNY 6.7989 compared to CNY 6.8036 yesterday and CNY 6.8047 a week ago. This steady tightening of the fixing suggests a deliberate policy approach to support the currency and manage capital flows.
The US dollar can now finish below its 20-day moving average near CNH 6.7895 for the first time since the FOMC’s hawkish hold last month, a significant technical development that would confirm a shift in the intermediate-term trend. The offshore-onshore spread has narrowed, indicating that the PBOC’s efforts to support the currency are having a coordinated effect across both markets. Chinese economic data, particularly PMI readings and other activity indicators, will remain important to monitor for signs of whether the economic recovery is gaining traction or losing momentum.
Japan
The yen has staged a notable recovery today, driven not by material intervention but rather by a call from Finance Minister Katayama encouraging national pension funds to increase their investment in domestic assets. This policy signal has proven surprisingly effective in supporting the yen, with the currency rallying sharply and the Nikkei equity index gaining 1.2% in response to the supportive rhetoric. The 10-year Japanese Government Bond yield fell for the first time in two weeks, declining by an impressive 13 basis points, marking the largest single-day decline of the year.
The US dollar, which had been trading near JPY 162.40, fell sharply to JPY 161.30 before finding new bids and recovering somewhat. The intraday momentum indicators suggest there may be scope for additional USD gains, with JPY 162 posting the initial hurdle on any recovery attempt. The week’s low had been set Monday closer to JPY 161.20, and the dollar has recovered to about JPY 161.85 in the European morning, suggesting that the initial panic selling has abated.
Japan reported a 0.4% rise in June’s Producer Price Index, which lifted the year-over-year rate to 7.1% from a revised 6.6% in May (initially 6.3%). This represents the fourth consecutive increase in the year-over-year rate and the highest level since early 2023, indicating persistent inflation pressures at the producer level. Meanwhile, Japanese machine tool orders have soared amid the chip and AI frenzy, rising 52.8% year-over-year in June following a 37.5% jump in May and a 45.1% increase in April. Japanese machine tool orders are now at their strongest levels since late 2021 and early 2022, suggesting robust demand from technology-related industries.
Despite reporting a record current account surplus earlier in the week and yesterday’s Ministry of Finance weekly data showing that Japanese investors continued to sell foreign stocks and bonds, the yen found little traction until today’s policy announcement. The firm PPI reading combined with Finance Minister Katayama’s call to increase domestic pension fund investments has provided the catalyst for the currency’s recovery. Traders should monitor for any follow-through on the pension fund reallocation and watch for potential BOJ commentary on the yen’s strength and its implications for monetary policy.
Canada
The Canadian dollar edged slightly higher yesterday, though the move was not particularly convincing as traders appeared deterred by anticipation of today’s labor market report. The greenback frayed the 20-day moving average near CAD 1.4165 for the first time in nearly two months but ultimately settled above it and held above the CAD 1.4150 support level. Follow-through US dollar selling today saw the loonie strengthen to almost CAD 1.4135, its lowest level since June 19.
However, the greenback has recovered from its Asia Pacific low and returned to the CAD 1.4170 area in the European morning, suggesting that the initial momentum has faded. The intraday momentum indicators suggest this may represent the extent of the US dollar’s recovery in the near term, implying that any further upside will require additional catalysts or fresh technical breakouts.
Today’s June employment report represents the main feature of the North American session and will be difficult to exceed. May’s report was particularly strong, showing a 154,000 increase in full-time employment and a drop in the unemployment rate to 6.6% from 6.9% on a steady participation rate of 65%. After contracting in Q4 2025 and Q1 2026, the Canadian economy appears to have returned to growth in Q2, which should support continued labor market resilience. Any disappointment relative to May’s performance could weigh on the Canadian dollar, while a beat could provide support.
Australia
The Australian dollar has remained relatively confined, trading in a quarter-cent range above $0.6925 yesterday. The week’s high had been established near $0.6960, but the aussie reached $0.6970 today before stalling and slipping back to almost $0.6940, where it found bids during the European session. The intraday momentum indicators remain constructive, suggesting that dip-buyers continue to support the currency at lower levels.
The RBA’s policy stance and recent meeting minutes will continue to influence the aussie’s valuation, particularly as traders assess the likelihood of future rate movements. Australian economic data, including private credit growth and other activity indicators, will provide important signals about the health of the domestic economy and the central bank’s policy trajectory. The technical structure remains positive despite the narrow trading range, with support building at lower levels.
Emerging Markets
Mexico reported that headline price pressures have subsided to their mildest levels in five years last month. At 3.37% in June, the headline inflation rate represents a significant deceleration and the lowest reading in a five-year period. The core rate fell for the fifth consecutive month and now stands at 4.03%, the lowest level since April 2025, suggesting that underlying inflation pressures are moderating across the economy.
Given the better risk environment yesterday and the broader pullback in the US dollar, one might have expected the Mexican peso to recover more of Wednesday’s losses. However, the currency has performed more modestly. The US dollar traded to about MXN 17.5275, which is slightly below Tuesday’s high of approximately MXN 17.5450. Today, the Mexican peso is enjoying a slightly firmer tone, with the US dollar finding support near MXN 17.50. Today’s data may show that the economic recovery is uneven, with May’s industrial output expected to have contracted by 0.7% after the 2.1% surge in April. Such a result would be sufficient to push the year-over-year rate back below zero, which, with only a few exceptions, has generally been shrinking since mid-2024.
The Colombian peso has extended its impressive post-election surge, with a nearly 1.5% gain yesterday representing half of the week’s rally coming into today. The currency has led the emerging market complex higher and has appreciated by approximately 12% since the end of May presidential election, reflecting investor confidence in the new administration’s economic policies and outlook.
The Indian rupee has edged up today after falling in the middle of the week. The rupee spent yesterday and today consolidating with a slightly positive bias. The dollar reached INR 95.6085 on Wednesday but has seen INR 95.2250 today, reflecting modest rupee strength and a consolidation phase after earlier weakness. The rupee’s performance will continue to be influenced by capital flows, inflation dynamics, and the Reserve Bank of India’s policy stance.
Global Markets
With a few exceptions, the large equity markets recovered yesterday from the midweek air pocket. Investors appear to have concluded that given the nature of the two regimes, a wider berth must be given to the Middle East “ceasefire” situation, while recognizing the unknown breaking point for escalation. The large Asia Pacific equity markets rallied today, with notable exceptions including China and Taiwan. South Korea’s Kospi led the region with a 2.5% gain, reflecting strong regional momentum.
Europe’s Stoxx 600 fell during the first three sessions of the week but recovered yesterday and is slightly firmer near midday in Europe today. US index futures are narrowly mixed, reflecting uncertainty about the direction of near-term moves and the balance between risk-on and risk-off sentiment. The overall tone suggests that investors are cautiously optimistic but remain vigilant about geopolitical developments that could shift sentiment rapidly.
Benchmark 10-year yields fell between 4–7 basis points in Europe yesterday and 4–5 basis points in the US and Canada. This decline helped narrow peripheral premiums, including French spreads, which tightened alongside other peripheral markets. Yields are lower today, led by Japan’s impressive 13 basis point drop in the 10-year yield. European rates are mostly 2–3 basis points lower, and again peripheral premiums are narrowing, reflecting a risk-on environment and reduced safe-haven demand.
Gold settled firmly yesterday and snapped a three-session slide that had followed a three-session rally at the end of last week. The precious metal stalled today and slipped back below $4,100. A close above the $4,135 area would end the week on a firm note even if below last week’s close of approximately $4,177. The consolidation in gold reflects mixed signals about inflation expectations and real rates.
Silver also snapped a three-day slide, which followed a four-day rally last week. The white metal has struggled to find much buying interest above $60 in recent sessions after settling last week a few pennies below $62.50. Silver rose to about $60.75 earlier today but met sellers that pushed it back to $59.50, indicating resistance at the $60 level and continued consolidation within a range.
August WTI crude oil has continued its pullback from recent highs. The contract recorded yesterday’s session lows late in the New York afternoon near $71.40, with Wednesday’s low at $71.75. It reached a three-day low today near $71.15. While this does not represent a return to the status quo ante, it does appear consistent with the idea that perhaps because neither side wants escalation, the ceasefire can be more resilient than one would have suspected. Technical talks between the US and Iran reportedly continue, adding an element of uncertainty but also suggesting a potential path toward de-escalation that could support lower oil prices.
