There have been two key developments this week and they are both evident today. The first is the continued pullback in oil prices. August WTI is off almost 9% this week, after dropping as much last week and 5.25% the week before. It is near $69 compared with slightly below $66 before the war began. September Brent is off a little more than 9% this week after a 7% drop the previous week and 5.2% the week before that. It is slightly below $73 compared with a little more than $70 before the war. The second is the meltdown in technology shares. As one would expect, it is most evident in the large bourses in Asia and the Nasdaq in the US.
The US dollar is mostly softer today, though the decline in oil prices has taken a toll on the Norwegian krone. It is off around 0.3% today and has been tagged for nearly 2% this week. The Dollar Index is off about 0.25% ahead of the North American session, and, if it is sustained, it would be the largest decline since early May.
Prices
G10
• The euro held above Wednesday’s low for the year (~$1.1325) and recovered to almost $1.1390 around the end of the European session on Thursday. The move above Wednesday’s high (~$1.1385) looked promising, and although it was not sustained yesterday, the euro extended the gains today to nearly $1.1415. Options for 2.1 bln euros at $1.1400 expire today. The five-day moving average is also near $1.1400, and the euro has not closed above it since June 16. The $1.1440 area corresponds to the (38.2%) retracement of the leg down since the mid-month high near $1.1620.
• The dollar also has climbed the five-day moving average against the Japanese yen. It is near JPY161.65 today, and the greenback has not settled below it since June 12. The dollar has slipped through it today and found initial support near JPY161.50, where options for nearly $1.25 bln expire today. It is not settled below JPY161 since June 17. The prospect of official intervention has deflected some of the dollar buying away from the yen, and ironically, so far this month, it is the best performing G10 currency, down around 1.4%.
• Yesterday, sterling held above the marginal new low for the year set Wednesday near $1.3140. It briefly traded above Wednesday’s high (~$1.3210) but settled below it. Sterling is trading firmer today and has tested the lower end of a band of resistance in the $1.3230-55 area. Sterling is the second best G10 currency performer this month. It joins the yen as the only other to have declined less than 2% this month.
• The Canadian dollar rose for the first time in 11 sessions yesterday. Its roughly 0.25% gain rivaled the Swiss franc for the top of the G10 currency leader board. The greenback peaked on Wednesday near CAD1.4250 and slipped briefly below CAD1.4180 in North America yesterday. It has not managed to extend yesterday’s losses today, but it is trading heavily. The next charts support is seen near CAD1.4150.
• Similar to the other currency pairs, the Australian dollar held above the low set on Wednesday and recovered to trade slightly above Wednesday’s high. It poked slightly above $0.6925. Yet, today, it initially was sold to almost $0.6875 and marginal new low since early April. However, it has recovered to around $0.6905 in European turnover. A band of resistance between about $0.6935 and $0.6955. There are options for about A$530 mln at $0.6900 and A$500 mln at $0.6875 that expire today.
EM
• The Mexican peso rose for the first time this week yesterday. On Wednesday, the dollar reached MXN17.6765, its highest level since April 8. Yesterday’s pullback saw it slip through MXN17.48 in late dealings. It is holding today. The MXN17.48 area corresponds to (38.2%) retracement of the greenback’s rally since the June 15 low (~MXN17.1575). A break would target the MXN17.4170 area next. With around a 0.55% gain yesterday, the peso was the strongest among emerging market currencies.
• The offshore yuan rose for the first time yesterday in three days. The dollar peaked on Wednesday near CNH6.82 and pulled back to around CNH6.7970 yesterday. The dollar is consolidating in a roughly CNH6.7980-CNH6.8095 range today. The dollar is poised for its first back-to-back gain for the greenback here in Q2. The PBOC set the dollar fix lower today for the first time this week (CNY6.8166 vs CNY6.8209 yesterday). Reports suggest that the PBOC raised the interest rate by five basis points on its one-year medium-term lending facility to 1.50%. It is not clear how much of the CNY500 bln (~$73.5 bln) issued this month was lent there.
• Indian markets were closed today for a national holiday. The dollar rose by less than 0.1% against the rupee this week, and its roughly 0.65% gain this month makes it the best performing currency in Asia.
Other Markets
• After opening higher yesterday, the Nasdaq made a new nine-day low near 25123 yesterday. The S&P held below Tuesday and Wednesday’s highs before falling to a nine-day low itself near 7419. Nasdaq futures are off a little more than 1% and the S&P 500 is trading around 0.5% lower. Global equities are heavy today. The technology meltdown continued today in Asia-Pacific with the Nikkei off almost 4.2% and South Korea’s Kospi down 5.8%. All the large markets in the region were off but Australia. Europe’s Stoxx 600 is off about 0.75% in late morning turnover in Europe, which gives back most of yesterday’s gains.
• Benchmark 10-year yields are softer. The 10-year JGB yield is off 2.5 bp to 2.59%, while European benchmarks are fractionally lower. The 10-year US Treasury yield is off a little more than a basis point to dip below 4.38%. Helped by the pullback in oil prices, and arguably the drop in equity market, G7 ten-year yields fell by 6-13 bp this week.
• After dropping around 4.6% Tuesday and Wednesday, gold bounced 1% on Thursday, which is its largest gain since June 15. It looks like some buying interest was kindled after the push below $4000. It reached $4044. It has extended the recovery to around $4054 today. A move above $4060 target $4100-$4120. Silver stabilized as well yesterday. It rose by about 1.8%. A move above $59.50 could target the $61.70 area.
• August WTI initially fell slightly through $68.60 yesterday, to briefly trade below the 200-day moving average (~$70.10 today) for the first time since early February. It reversed higher and reached about $71.60 in North America. Estimates suggest oil exports from the Persian Gulf have reached at least 75% of the pre-war levels. There were two developments to note. First, in what appears to be part of its negotiations for a larger quota, Iraq threatens to leave OPEC (UAE did last month). Second, apparently Iranian forces struck a ship using a “unapproved” route through the Strait of Hormuz. The attack seemed to freeze activity and lift crude prices. Reports suggest ships are still moving through the Strait today and August WTI is sitting near yesterday’s lows.
Data
• The US reports May goods trade and May inventory data, while the University of Michigan’s final June confidence survey is due. The US merchandise deficit has averaged $82.2 bln a month. Given the positioning around Liberation Day last year, the comparison with the Jan-April 2025 period may not be helpful (though the trade deficit averaged $135.2 bln a month then) and price changes make the comparison with 2024 (average monthly shortfall was $90.7 bln in the first four months). What is often left out of the analysis, is some 15-20% of US goods imports come from affiliates or branches of US companies abroad. Estimates suggest around 1/3 of US imports take place within multinational companies. The significance does not lie with the current account balance—which measures goods/services crossing national frontiers, but the sensitivity of trade to currency fluctuations. Separately, with oil and gasoline prices falling between the preliminary and final University of Michigan’s survey, it would not be surprising to see confidence measures edge higher and inflation expectations lower. Next week’s highlight is the US jobs report (Thursday due to the holiday). The median in Bloomberg’s survey stands at 130k rise in nonfarm payrolls.
• As widely anticipated, Mexico’s central bank maintained its overnight rate target at 6.5% yesterday and continued to point to an extended hold. Today, attention turns to May’s trade balance. It began the year with deficits in January and February but swung back to surplus in March and April. In the first four month, Mexico reported an average trade surplus of $877 mln a month. In the previous four years, it reported a trade deficit in the first four months of the year.
• The ECB’s inflation survey saw one-year expectations soften. The former fell to 3.5% from 4.0%. The three-year expectation was steady at 2.9%. It will not move anyone’s needle. The highlight next week is the preliminary eurozone June CPI (expected to have eased to 3.1% from 3.2%.
• Tokyo’s June CPI ticked up to 1.7%, the highest this year. It finished last year at 2.0%. The core rate, which excludes fresh food rose to 1.6% from 1.3%. It is the first increase in the year-over-year rate since last October. Government measures, like a temporary waiver of water charges and cap on gasoline prices have kept price pressures in check. Still, it appears that Japanese companies are passing along higher labor costs and import prices lifted in part by the yen’s weakness. Next week’s highlight is the Tankan survey, which looks broadly stable.
Reviewed by Marc Chandler
on
June 26, 2026
Rating:
