On-Again Off-Again Middle Ease Cease Fire is On Again: Oil and Rates are Firm while Greenback Consolidate

The US dollar is mostly trading within the ranges seen before the weekend. Shortly before the weekend, though after the markets closed, the US acknowledged new strikes on Iran and there were more hostilities over the weekend. Yet, before the markets opened today, the US and Iran agreed to a new “ceasefire”. Traffic in the Strait of Hormuz reportedly slowed and oil prices are firmer. 

Amid the month- and quarter-end considerations, the ECB annual conference in Sintra will draw attention with Lagarde, Bailey, Macklem, and Warsh speaking Wednesday. Due to the US holiday on Friday, the June jobs data will be reported Thursday. The median in Bloomberg’s survey stands at 113k now. Last year, the US created about 10k jobs on average. Through May this year, the average is almost 115k. China as introduced a new policy rate, the overnight reverse repo, and it appears to have signaled a possible rate cut in today’s first operation. Separately, China has escalated its feud with Japan and added 20 Japanese companies to its export control list. 

Prices 

G10

• The euro reached almost $1.1435 at the end of last week before pulling back to the middle of the session’s range, near $1.1385, in the waning hours of the session. The high was a few hundredths of a cent shy of the (38.2%) retracement of the euro’s retreat since the mid-month high (~$1.1620). It is trading in a $1.1380-$1.1415 range today. It is straddling the $1.140 area late in the European morning, where options for 1.3 bln euros at $1.1400 expire today. 

• In the last three sessions, the dollar has been confined to a clear range against the Japanese yen: JPY161.50-JPY161.95. It remains in that range today. At the lower end of that range there are options for $2.3 bln that expire today. Last week the dollar rose by a little more than 0.25%. It was the sixth weekly advance in the past seven weeks. 

• Sterling briefly traded above $1.3230 ahead of the weekend; its best level in three sessions. The (38.2%) retracement objective of the losses since the mid-May high is almost $1.3265. Sterling has been confined to a narrow range of about $1.3190 and almost $1.3230 so far today. The new Labour MP and aspiring prime minister, Burnham is expected to give an important economic speech this week and may name who would be his chancellor. It is not clear whether he will face much opposition in the leadership contest. 

• The Canadian dollar’s bounce after falling for ten consecutive sessions through the middle of last week seemed lackluster. The greenback retreated from almost CAD1.4250 to about CAD1.4170. The previous week’s high was about CAD1.4185. It has traded between CAD!.4175 and nearly CAD1.4210 today. A convincing break of CAD1.4135 would boost confidence that a top is in place. 

• The Australian dollar’s recovery from the its lowest level since early April (~$0.6875) was uninspiring ahead of the weekend. It recorded a new session high in North America, slightly above $0.6915. It is trading sideways today between about $0.6880 and $0.6110. It looks stuck now between the 200-day moving average (~$0.6860) and the five-day moving (~$0.6925), which it has not settled above since June 16.

EM 

• The dollar fell against the Mexican peso in North America ahead of the weekend. It reached almost MXN17.43, a three-day low and near the halfway mark of the rally gains from the mid-June low (~MXN17.1575). It recovered to around MXN17.5080 before stalling. It is trading between around MXN17.44030 and slightly more than MXN17.56 so far today. The next area of support may be found in the MXN17.3550-MXN17.3750, which houses the 20-day moving average and the next retracement objective. 

• The offshore yuan consolidated in the past two sessions after falling to its lowest level in a month in the middle of last week. The range set last Wednesday remains operative: ~CNH6.790-CNH6.82. The PBOC set the dollar’s reference rate at higher week-over-week for the second consecutive week last week. It was the first time since the end of last September. The fix was set at CNY6.8175 (CNY6.8166 before the weekend. It was the fifth higher fix in the six sessions. The PBOC set the interest rate on its new overnight liquidity tool (overnight reverse repo) at 1.25%, a little below expectations, and it looks like a subtle rate cut. The central bank did not disclose the rate of the operation, but reports say that it was the rate on the CNY300 bln (~$44 bln) operation.

• The decline in oil prices and the technology shares appears to have helped buoy the Indian rupee, which did not trade before the weekend owing to a national holiday in India. The rupee traded at its best level since early May last Thursday. The dollar found support near INR94.14. It has not traded below INR94.00 in a little more than two months. The dollar gapped lower last Thursday and entered that gap today, without closing it. The gap extends toINR94.5975 and today’s high was a little below INR94.5590. 

Other Markets

• Global equities are mixed today. The recovery of the S&P 500 and the Nasdaq after new lows for the move were recorded ahead of the weekend. Shortly after equities closed, the US announced it has struck Iran. Today’s shortly after the Asia Pacific session began today, the US announced it reached a new agreement with Iran to stop the tit-for-tat strike. And even though Beijing added 20 Japanese companies to its export control list, Japanese equities posted modest gains. China and Hong Kong indices rose more than 1%. While’s South Korea’s Kospi slipped fractionally (~0.2%), its over-the-counter index (KOSDAQ) jumped slightly more than 8%. Europe’s Stoxx 600 is nursing a minor low, after shedding nearly 0.7% before the weekend. Nasdaq futures are trading a little more than 1% better and the S&P 500 is up about 0.75%. 

• Benchmark 10-year yields fell to new three-month lows ahead of the weekend in several countries in Europe, including Germany, Italy, Netherlands, Switzerland, and Greece. The 10-year US Treasury yield fell for the fourth consecutive session, and near 4.37% it settled at its lowest level since May 8. However, with oil prices better bid, yields are higher today (~3 bln in Japan and Australia) around 1-2 bp higher in Europe. The 10-year US Treasury yield is up a little more than one basis point today to 4.38%. 

• Gold straddled the $4000-level for the past three sessions. It rose to $4096 ahead of the weekend. It pushed above the five-day moving average (~$4081) but failed to close above it. The $4021 area corresponds to the (38.2%) retracement of the leg down from the June 17 high (~$4382). It is trading softer with the pre-weekend range. It found bids near $4025. Underappreciated, changes in gold are the most correlated with changes in the Nasdaq (30-days 0.70+) in over two decades. Some observers have suggested gold may have been sold to meet margin calls given the rout in tech stocks. Silver posted an outside up day on Friday, but there has been no follow-through buying. It has retreated to around $57.40 after having been turned back from its approach of $60. 

• Despite the fraying of the cease fire in the Middle East last Thursday, the market was undaunted and took the August WTI contract to about $68.55, its lowest level since March 4. It settled near session lows and below the 200-day moving average (~$70.20). It is consolidating today between about $69.30 and $71.

Data

• The US data focus shifts to the labor market this week, and even in the best of times, today’s Kansas Fed’s service survey and the Dallas Fed’s manufacturing survey typically are not market movers. 

• While the eurozone’s M3 and lending figures used to capture the market’s attention, it is considerably less so now. For the record, M3 growth accelerated to 3.2% from 2.7% year in the year through May. Lending for house purchases increased though consumer credit slowed. Lending to non-financial firms rose 4% year-over-year from 3.4%. The EU sentiment surveys tend not to elicit a market response and today’s release of the June survey, which showed small improvement (except for consumer confidence), appeared to have minor impact. 

• The market had little reaction to the UK’s consumer credit and mortgage activity reports. Consumer credit growth was steady, while mortgage lending slowed a touch. 

• Japan reported retail sales rose 1.9% in May after surging 2.1% in April. The median forecast in Bloomberg’s survey was for a 0.5% decline. It was the third consecutive increase. They have averaged a monthly increase of 1.2 this year compared with 0.1% in the first five months of 2025. The rise in prices flattered the report. Retail sales rose 5.3% from a year ago (2.8% in April compared with 0.5% decline in the broad measure of household spending). While many economists talk as if consumption is simply a matter of income, in practice it seems more complicated and a reflection of a myriad of cultural factors. Real cash earnings in Japan are rising at the fastest level in five years. After rising 1.4% in Q1 26, consumer spending appears to have slowed here in Q2. The median projection in Bloomberg’s survey is that it rose 0.5% in Q2. 

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