Subdued activity mostly characterizes the capital markets today, ahead of the sessions highlight, the outcome of the FOMC meeting that Kevin Warsh will chair for the first time. Given his criticisms of the central bank and his past comments, it is possible he does not participate in the Summary of Economic Projections. At the press conference, he may share initiatives that are under consideration. There is a strong belief that after an extended period of continuity (Bernanke, Yellen, Powell), a new chapter in the Federal Reserve’s history is beginning.
The dollar is mostly firmer today, but the Swiss franc and Japanese yen are bucking the trend. Sweden’s Riksbank delivered a hawkish hold implying a rate hike by early 2027, but the krona is off about 0.20%, and among the G10 currencies, only the New Zealand dollar is heavier. The UK’s April CPI was softer than expected but there was little doubt before it that the Bank of England will hold policy steady tomorrow. The same is true for Norway’s Norges Bank. Late today, Brazil’s central bank meets and the swaps market leans toward a 25 bp rate cut that would bring the Selic to 14.25%. Oil prices initially extended their sharp decline but stabilized and both Brent and WTI futures are slightly higher.
Prices
G10
• Even though the euro was confined to Monday’s range yesterday, it posted its highest settlement since June 4, a little above $1.1605. The $1.1615 level, which has been frayed on an intraday basis for the last two sessions, corresponds to the (61.8%) retracement of the euro’s decline since the May 29 high (~$1.1685). The euro is trading quietly with a softer bias today. It has slipped below $1.16 in Europe. Initial support is seen $1.1590 but yesterday’s low was closer to $1.1575. We continue to note resistance in the $1.1640-50 area.
• Given that the BOJ’s rate hike was well discounted, we did not expect it to have much of an impact on the yen. In subdued trading today, it is within yesterday’s range. The greenback held above JPY160 yesterday and settled near its highs, slightly below JPY160.50. Last week’s high was slightly shy of JPY160.60. The April 30 high before the BOJ intervention was a smidgeon above JPY160.70.
• Sterling held above $1.3390 in the Asia Pacific session yesterday, a little below Monday’s low (~$1.3405) and set the session high near midday in NY near $1.3445. It must overcome resistance around $1.3485 to be meaningful, but for the first time in three weeks, it settled above the 20-day moving average. There has been no follow-through today, and sterling is trading in a narrow range (~$1.3410-$1.3435). Softer than expected CPI (0.2% vs. 0.4%) has spurred a Gilts rally that has not impressed sterling traders.
• The US dollar made another run at last week’s high for the year against the Canadian dollar (~CAD1.4025) but held slightly below. Still, the greenback posted its highest settlement since early last December and remains within striking distance. It is in less than a 10-tick range around CAD1.40. Yesterday’s session high was set in Asia-Pacific hours, and the session low was near midday in NY (~CAD1.3980). The US dollar’s 3.5% advance since the May 1 low (~CAD1.3550) is getting stretched. We are looking for some signal in the price action that a top is in place.
• The Australian dollar traded quietly yesterday, inside Monday’s range. It is within yesterday’s range today. We have been monitoring a head and shoulder topping pattern. Although the downside momentum stalled last week, the Aussie has not risen back above the neckline, which is $0.7080-$0.7100. Yesterday’s high was $0.7080.
EM
• The Mexican peso advanced for the seventh consecutive session against the US dollar yesterday. It is the longest rally since last September’s eight-day run. The peso has appreciated by about 1.5% over the run. However, the downside momentum looks to have stalled in the MXN17.15-16 area. The low since May 2024 was recorded around the middle of February near MXN17.0865. The greenback is a little firmer today, but within yesterday’s range. A move above MXN17.2750 could signal a near-term low is in place.
• The offshore yuan rose it a new three-year high today. The greenback was sold to CNH6.7540. Through yesterday, the offshore yuan has risen by about 3.25% this year while the onshore yuan has risen by slightly more than 3.4%. This is the best in the region and accept to the Singaporean dollar, the other Asian currencies have declined against the dollar. The PBOC set the dollar’s reference rate at CNY6.8096 (CNY6.8108 yesterday).
• The US dollar gapped lower against the Indian rupee on Monday and consolidated inside that range yesterday. The near-term price action is important for the technical outlook. The top of the gap is around INR94.9475. If the dollar settles above it, it would be seen as a bullish development. On the other hand, follow-through dollar selling could signal a test on last month’s low near INR94.07. Today, the dollar was sold to a six-week low near INR94.29 but gains were trimming in late dealings, and it settled near INR94.5325.
Other Markets
• Profit-taking in the US tech stocks saw the Nasdaq tumble a little more than 1.1% yesterday, snapping a three-nearly 6% rally. The S&P fell almost by 0.60%. However, most bourses in the Asia Pacific region shrugged it off, but Hong Kong and the index of mainland shares that trade there, though China’s CSI 300 rose nearly 1%. Europe’s Stoxx 600 is extending its advance for the fifth consecutive session. In futures trading, the Nasdaq is up about 0.5% while the S&P 500 and Dow are narrowly mixed.
• Falling oil prices appeared to lend support to European and North American bonds yesterday. Benchmark 10-year yields fell 2-4 bp. The 10-year US Treasury yield fell in back-to-back sessions for the first time this month and near 4.44%, the yield has been practically flat since the end of April. Falling yields helped ensure a solid reception to Treasury’s $13 bln sale of 20-year bonds. Asia Pacific bond markets played catch-up and fell 4-7 bp today. European yields are narrowly mixed but for the 10-year Gilt, which is off 4-5 bp. The 10-year US Treasury yield is slightly softer but above 4.43%.
• Gold recovered from the test on $4000 last Thursday and approached $4370 on Monday before consolidating yesterday. It continues to consolidate and remains within Monday’s range. Nearby resistance is seen in the $4375-$4405 band. For its part, silver bottomed last week near $61.60 and reached about $71.30 on Monday before consolidating yesterday and today.
• July WTI took a leg down in North America yesterday amid reports that the MOU between the US and Iran will lift the sanctions on Iranian oil. The July WTI contract was sold to a new three-month low near $75.50. It fell another $1 today before recovering and is now slightly firmer on the day. The $74.35 area corresponds to a (61.8%) retracement of this year’s rally and the 200-day moving average is near $71.20.
Data
• Despite elevated household debt stress levels and the decline in savings, Americans continue to shop. The median forecast in Bloomberg’s survey is for retail sales to have risen by 0.5% in May, the same as in April. In the first four months of the year, US retail sales grew by an average of 0.8% a month compared with 0.2% a month in Jan-Apr 2025 period. Of course, the retail sales figure has been inflated by rising prices, but still we know that through April, real personal consumption rose by an average of 0.2% a month compared with a flat average in the first four months of last year. Still, it is outcome of the FOMC meeting—Warsh’s first as chair—and the Summary of Economic Projections (of which he is critical and has suggested before that he might not participate in the exercise. There is little doubt but that the FOMC will standpat and the statement may be crafted to avoid the three dissents over the bias at the April meeting. The post-FOMC press conference will draw much attention as the markets take the measure of the new chair.
• Ahead of tomorrow’s Bank of England meeting, at which it will most likely stand pat, the UK reported an acceleration in May’s CPI. The 0.2% increase was half of the median forecast in Bloomberg’s survey and kept the year-over-year rate steady at 2.8%. At an annualized pace, UK CPI has risen by 3.6% this year. Core prices are 2.6% higher year-over-year after a 2.5% increase in April. Service prices accelerated to 3.7% from 3.2%. Input producer prices rose 0.2% after a 2.6% surge in April (revised from 2.4%) for a year-over-year increase of 8.7% (vs.7.9%). Output producer prices were eased to 4.0% from 4.1%. The divergence warns of margin risk.
• True to form, Japan’s trade balance deteriorated in May (as it has done in 18 of the past 20 years). It nearly always has improved in June. Japan reported a trade deficit of about JPY379 bln, its first deficit since January. Through May, its trade deficit is around JPY577 bln vs. almost a JPY2 trillion shortfall in the first five months of last year. Separately, Japan reported core machine orders surged 8.7% in April after they plunged 9.4% in March.
Reviewed by Marc Chandler
on
June 17, 2026
Rating:
