Market Overview
Two dominant themes have emerged this week and are clearly visible in today’s trading: a pronounced pullback in crude oil prices across both contracts and a significant technology sector selloff that has rippled through global equities. The US dollar has softened accordingly, though the decline remains measured as traders navigate mixed signals from monetary policy divergence and shifting risk sentiment.
United States
The greenback is trading mostly softer today, with the Dollar Index off approximately 0.25% ahead of the North American session. If sustained, this would mark the largest single-day decline since early May. The pullback in oil prices has particularly pressured commodity-linked currencies, though the broad dollar weakness reflects a more complex interplay of factors including equity market volatility and shifting rate expectations.
On the economic calendar, the US will report May goods trade and May inventory data today, alongside the University of Michigan’s final June confidence survey. The merchandise trade deficit has averaged $82.2 billion monthly over recent periods. Comparisons with prior-year data warrant careful interpretation given the timing around Liberation Day last year; the January through April 2025 period showed an average monthly trade deficit of $135.2 billion, compared to a $90.7 billion average for the same months in 2024. A critical but often-overlooked element of trade analysis involves the composition of import flows: approximately 15 to 20 percent of US goods imports originate from affiliates or branches of US companies operating abroad, with estimates suggesting roughly one-third of total US imports occur within multinational corporate structures. This dynamic carries significant implications for currency sensitivity rather than current account interpretation.
The University of Michigan confidence survey should reflect the recent decline in oil and gasoline prices between the preliminary and final readings, potentially supporting modest improvements in sentiment measures and downward revisions to inflation expectations. Looking ahead to next week, the nonfarm payrolls report on Thursday—moved due to the Independence Day holiday—represents the marquee event. The Bloomberg consensus median stands at 130,000 jobs added. The JOLTS report, ADP employment figures, and ISM manufacturing surveys will provide intermediate data points for traders positioning ahead of that release.
Eurozone
The euro has demonstrated resilience at critical support levels this week. After holding above Wednesday’s low for the year near $1.1325, the currency recovered to almost $1.1390 by the end of European turnover on Thursday. The move above Wednesday’s high around $1.1385 initially appeared constructive, though the advance was not sustained yesterday. Today, however, the euro has extended gains to nearly $1.1415. A significant technical barrier exists at the $1.1400 level, where options for 2.1 billion euros expire today. The five-day moving average also clusters near $1.1400, and the euro has not closed above this level since June 16—a meaningful break would signal genuine bullish intent. The $1.1440 area corresponds to the 38.2 percent Fibonacci retracement of the downleg that commenced from the mid-month high near $1.1620.
On the policy front, the ECB’s latest inflation survey revealed softening one-year expectations, which fell to 3.5 percent from the prior 4.0 percent reading. The three-year expectation remained steady at 2.9 percent. While these shifts are modest, they provide some evidence of moderating price pressures in market expectations. The highlight for next week will be the preliminary eurozone June CPI release, which is expected to ease to 3.1 percent from the prior 3.2 percent, continuing a gradual disinflationary trend that may support the case for additional ECB accommodation.
United Kingdom
Sterling has shown relative strength compared to most G10 currencies this week, declining only around 1.3 percent on a month-to-date basis—the second-best performer after the Japanese yen. Yesterday, cable held above the marginal new yearly low set Wednesday near $1.3140, briefly trading above Wednesday’s high around $1.3210 before settling below it. Today, sterling is trading firmer and has tested the lower end of a resistance band between $1.3230 and $1.3255. This consolidation pattern suggests traders are cautious about committing to fresh directional moves until clearer catalysts emerge. UK GDP data and Bank of England communications will remain key focal points for positioning, though the near-term technical picture appears balanced between the aforementioned support and resistance zones.
China
The offshore yuan rose for the first time in three days yesterday, breaking a modest losing streak. The dollar had peaked on Wednesday near CNH6.82 and pulled back to approximately CNH6.7970 yesterday. Today, the greenback is consolidating within a relatively tight range between CNH6.7980 and CNH6.8095. Notably, the dollar is positioned for its first back-to-back gain of the quarter here in Q2, signaling a potential shift in momentum after sustained weakness earlier in the year.
The People’s Bank of China set the dollar fix lower today for the first time this week, establishing the fixing at CNY6.8166 compared to CNY6.8209 yesterday, suggesting official preference for gradual appreciation in the yuan. Market reports indicate that the PBOC raised the interest rate by five basis points on its one-year medium-term lending facility, bringing it to 1.50 percent. However, the precise allocation of the CNY500 billion (approximately $73.5 billion) issued this month across various facilities remains unclear, leaving some ambiguity regarding the true tightening impact. Chinese PMI data and policy developments will continue to warrant close monitoring as traders assess the trajectory of monetary conditions and growth momentum.
Japan
The Japanese yen has emerged as the best-performing G10 currency this month, declining only around 1.4 percent despite the broader dollar strength visible elsewhere. This outperformance reflects genuine intervention concerns and BOJ policy divergence. The dollar has climbed above its five-day moving average against the yen, currently trading near JPY161.65. The greenback has not settled below this level since June 12. However, the dollar has slipped through this moving average today and found initial support near JPY161.50, where options for nearly $1.25 billion expire today. The dollar has not closed below JPY161 since June 17, establishing this level as a key technical reference. The prospect of official intervention has demonstrably deflected some dollar buying interest away from the yen, a reminder that geopolitical and policy-driven intervention considerations remain live market factors.
Tokyo’s June CPI ticked up to 1.7 percent, marking the highest reading of the year, compared to 2.0 percent at the end of the prior year. The core rate, which excludes fresh food, rose to 1.6 percent from the prior 1.3 percent—the first year-over-year increase in this measure since last October. Government measures, including temporary waivers on water charges and caps on gasoline prices, have provided some offset to underlying price pressures. Nevertheless, Japanese companies appear to be passing along higher labor costs and import prices that have been elevated in part by yen weakness. The upcoming Tankan survey next week is expected to show broadly stable business sentiment, though traders will parse details on capex and pricing intentions carefully. Bank of Japan meeting minutes and forward guidance on rate trajectory remain critical focal points given the yen’s sensitivity to BOJ communications and the persistent intervention risk that constrains dollar upside.
Canada
The Canadian dollar rose for the first time in eleven sessions yesterday, with a gain of roughly 0.25 percent that rivaled the Swiss franc for top honors on the G10 currency leaderboard. The greenback had peaked on Wednesday near CAD1.4250 and slipped briefly below CAD1.4180 in North American turnover yesterday. While the loonie has not managed to extend yesterday’s losses today, it is trading with a heavy tone. The next charted support is identified near CAD1.4150. Canadian GDP data and Bank of Canada communications regarding the policy path will be essential for determining whether yesterday’s recovery can be sustained or whether the recent downtrend resumes. The technical setup suggests consolidation rather than a clear directional commitment at present.
Australia
The Australian dollar held above the low set on Wednesday and recovered to trade slightly above Wednesday’s high, poking marginally above $0.6925. Today, however, the aussie initially was sold to almost $0.6875, marking a marginal new low since early April. The currency has recovered to around $0.6905 in European turnover, suggesting some stabilization at these depressed levels. A band of resistance exists between approximately $0.6935 and $0.6955. Options for about A$530 million at $0.6900 and A$500 million at $0.6875 expire today, indicating significant option-related interest at these technically important junctures. The Reserve Bank of Australia’s policy stance and private credit developments will remain key drivers of sentiment, while the technical consolidation pattern suggests traders are awaiting clearer catalysts before committing to fresh directional moves.
Emerging Markets
The Mexican peso rose for the first time this week yesterday, recovering from a sharp Wednesday peak when the dollar reached MXN17.6765, its highest level since April 8. Yesterday’s pullback saw the greenback slip through MXN17.48 in late dealings, and it is holding at that level today. The MXN17.48 area corresponds to the 38.2 percent Fibonacci retracement of the greenback’s rally since the June 15 low near MXN17.1575. A decisive break below this level would target the MXN17.4170 area next. With a gain of approximately 0.55 percent yesterday, the peso was the strongest among emerging market currencies, reflecting genuine buying interest. Mexico’s central bank maintained its overnight rate target at 6.5 percent yesterday and continued to signal an extended hold on policy, supporting the currency. Today, attention turns to May’s trade balance data. Mexico began the year with deficits in January and February but swung back to surplus in March and April. Over the first four months of the year, Mexico reported an average trade surplus of $877 million monthly, a notable shift from the prior four-year pattern that consistently showed trade deficits in the first four months.
The Indian rupee saw minimal movement this week, with the dollar rising by less than 0.1 percent against the unit. However, the rupee’s month-to-date performance shows the dollar gaining approximately 0.65 percent, making it the best-performing currency in Asia on a monthly basis. Indian markets were closed today for a national holiday, limiting trading activity and liquidity in the currency pair.
Global Markets
Equity markets have experienced significant pressure, with technology shares bearing the brunt of a broad-based selloff. After opening higher yesterday, the Nasdaq made a new nine-day low near 25,123, while the S&P 500 fell to a nine-day low itself near 7,419. Nasdaq futures are trading off more than 1 percent, and the S&P 500 is lower by approximately 0.5 percent in early North American turnover. Global equities are heavy across the board. The technology meltdown continued with particular severity in the Asia-Pacific region, where the Nikkei fell almost 4.2 percent and South Korea’s Kospi declined 5.8 percent. All large markets in the region were in the red with the exception of Australia. Europe’s Stoxx 600 is off about 0.75 percent in late morning European turnover, giving back most of yesterday’s gains and signaling that yesterday’s modest recovery has proven short-lived.
Benchmark ten-year yields have softened across major economies. The ten-year Japanese Government Bond yield is off 2.5 basis points to 2.59 percent, while European benchmarks are fractionally lower. The ten-year US Treasury yield is off a little more than one basis point, dipping below 4.38 percent. Supported by the pullback in oil prices and arguably the decline in equity markets, G7 ten-year yields fell by 6 to 13 basis points during the week, reflecting a flight-to-quality bid and reduced inflation expectations.
Gold has demonstrated constructive technical behavior after testing critical support. After dropping approximately 4.6 percent on Tuesday and Wednesday, gold bounced 1 percent on Thursday, its largest single-day gain since June 15. This reversal suggests some buying interest was kindled after the push below the $4,000 psychological level. Gold reached $4,044 and has extended the recovery to around $4,054 today. A move above $4,060 would target the $4,100 to $4,120 range, representing a meaningful technical breakout. Silver has also stabilized, rising approximately 1.8 percent yesterday. A move above $59.50 in silver could target the $61.70 area.
Crude oil has experienced the most dramatic price action, with August WTI off almost 9 percent this week after dropping a similar magnitude the prior week and 5.25 percent the week before that. August WTI is currently near $69 compared with slightly below $66 before the war began. September Brent has declined a little more than 9 percent this week after a 7 percent drop the previous week and 5.2 percent the week before that. September Brent is slightly below $73 compared with a little more than $70 before the war commenced. August WTI initially fell slightly through $68.60 yesterday, briefly trading below the 200-day moving average (approximately $70.10 today) for the first time since early February. The contract reversed higher and reached about $71.60 in North American turnover. Estimates suggest oil exports from the Persian Gulf have reached at least 75 percent of pre-war levels, indicating a substantial recovery in supply flows.
Two notable developments have emerged regarding crude supply and geopolitics. First, in what appears to be part of negotiations for a larger quota, Iraq has threatened to leave OPEC, following the United Arab Emirates’ departure last month. Second, Iranian forces apparently struck a ship using an “unapproved” route through the Strait of Hormuz. The attack appeared to freeze activity temporarily and lift crude prices, though reports suggest ships are still moving through the Strait today and August WTI is sitting near yesterday’s lows, indicating the market has largely digested the incident.
