The markets have weathered the US tariffs and war in the Middle East. A new disruption has emerged—unwinding tech investment--. The S&P and Nasdaq are poised gap lower and the South Korea’s Kospi dropped 10% today (and is still up nearly 95% for the year). The risk-off has pushed yields lower and the dollar higher.
The euro has been sold to a new low for the year, slightly above $1.1400. The yen is the only G10 currency holding its own today as Japan’s finance minister has played up talks with US Treasury Secretary Bessent, who has been quiet about the exchange rate through the BOJ intervention in April and May. With the BOJ rate hike delivered this month (but not in April), we have suggested Japanese efforts may receive more support from the US (as was the case in January).
Prices
G10
• The euro has been sold to new lows for the year today, slightly below $1.1400. The previous low for the year was set in mid-March near $1.1410. A break of the $1.1390, last August’s low, could signal a test on the $1.1340 area. The intraday momentum indicators are stretched but previous support in the $1.1420-25 area may now offer resistance.
• The yen returned to near the low from early July 2024 that spurred heavy intervention by Japanese officials. The dollar approached JPY161.95 yesterday. It was the greenback’s sixth rise in seven sessions. It is not only a one-way market, but volatility also has picked up. One-month implied volatility is near 8%, which is about 0.5% above where it was when the BOJ intervened at the end of April. Finance Minister Katayama has played up talks with US Treasury Secretary Bessent, and this appears to be helping the yen stabilize today, though the pullback in US yields may be helping too. The dollar has been confined to about a half of a yen below JPY161.75.
• Sterling was resilient in the face of the political drama that will lead to the seventh UK prime minister in a decade. It recovered from around $1.3180 and reached almost $1.3275 in early North American turnover yesterday before consolidating. It is trading softer today but within yesterday’s range. It has thus far held above $1.3200 but has spent little time above the $1.3250 yesterday’s close.
• Firmer than expected Canadian CPI failed to deter the Canadian dollar’s continued decline. It fell for the eighth consecutive session yesterday as US rates rose and the premium over Canada widened. The US dollar is firm but holding below yesterday’s high, near CAD1.4195, the highest level since April 2025. The US dollar is stretched but still no sign of a top.
• The Australia dollar taking another leg lower today. After barely settling above $0.7000, the Aussie has been sold to almost $0.6940 today, its lowest level since early April. It has convincingly broken below the trend line, connecting lows from mid-December, January, and March. It came in slightly above $0.7000 today. The break of $0.6980 is an ominous technical signal. It gives more energy to the possible head and shoulder top that has been unfolding (targets ~$0.6680). Given the stretched momentum indicators, perhaps the 200-day moving average, near $0.6885, would offer an initial target.
EM
• The risk-off mood is weighing on the Mexican peso today. It is near a two-week low. The recent consolidation looked dollar friendly and the greenback rose to MXN17.4760 today. The next target is the month’s high, recorded June 5 (MXN17.5360). The shift to the right, confirmed in the weekend run-off election lifted the Colombian peso to its best level since 2020. However, after surging about 1.6%, it pulled back and settled about 0.75% better, which still put it atop emerging market currencies yesterday.
• The offshore yuan is trading mostly sideways. The US dollar has carved a CNH6.75-CNH6.80 trading range and it ended yesterday near the middle of it. The greenback reached slightly above CNH6.7900 today. The PBOC set the dollar’s reference rate at CNY6.8170 (CNY6.8150 yesterday). It was the third consecutive higher fix, the longest such streak since the end of April. The fix was also the highest since June 8.
• The Indian rupee fell to six-day lows today amid reports of dollar purchases by corporates and overnight borrowing rates fell as the central bank injected cash into the banking system. The dollar reached INR94.9150. We are watching the top of the gap created with the lower opening on June 15, near INR94.9475.
Other Markets
• Equities are under pressure today. The US Nasdaq declined for the third session in the past four. More commentators are talking about a rotation. The S&P 500 record an ostensibly bearish outside down day. A break of 25960, last Thursday’s low, would suggest a return to the month’s low, near 25000. The heavy tone in the S&P and Nasdaq seemed to weigh on Asian and European equities today. Most of the large bourses in the Asia Pacific regions fell by 2-3%, but the high-flying South Korea Kospi was tagged for 10% and the Nikkei tumbled 3.5%. Europe’s Stoxx 600 is off almost 0.80%, which if sustained, would be the largest drop since mid-May.
• The US 10-year yield rose by a little more than five basis points yesterday. It is a slightly larger increase than seen in the immediate reaction to the FOMC’s hawkish hold last week. Benchmark 10-year yields are mostly 2-3 bp in Europe and the 10-year Treasury yield is off nearly three basis points to 4.48%.
• Gold finished firmly yesterday but could not re-establish a foothold above $4200 on a closing basis. It has been sold to an eight-day low today, a little below $4100. The month’s low is near $4024. Silver settled near the North American session lows, slightly above $65. Follow-though selling today sent it to around $61.80. This year’s lows are closer to $61.00-50.
• August WTI peaked in early Asia Pacific trading on Monday (~$75.40) and tumbled to about $73.25 in North America. Despite some brinkmanship tactics, reports from both the US and Iran spoke of progress. The contract slipped briefly below $72.50 but is near $73.50 now.
Data
• Nearly a week ago, the Philadelphia Fed reported that its June business outlook improved from -0.4 to 10.3. Today, its survey of non-manufacturing activity will be reported. The Richmond Fed also will report its June survey results. The focus, however, is on the preliminary June US PMI. Growth in the manufacturing sector (55.1 in May, nearly a four-year high) may slow a little, but service activity may have quickened and that will help fuel a stronger composite, which could reach its highest level since January. The Atlanta Fed’s GDP tracker puts Q2 growth at 3%.
• Mexico reports April retail sales today. A small 0.1% gain is expected, the same as March. However, given the base effect (-0.9% in April 2025), the year-over-year pave can improve to 3.6% from 2.9%. Also, Mexico will report the IGAE economic activity, which is similar to a monthly GDP estimate. The median forecast in Bloomberg’s survey is for a 0.80% increase, which would be the strongest since last October. Banxico meets on Thursday, but there seems to be little doubt about the outcome: leaving the 6.50% overnight target steady.
• The preliminary June eurozone manufacturing PMI was softer at 51.3 (from 51.6). The contraction in services slowed (48.9 vs. 47.7) as did the composite. But, at 49.5 (from 48.8 in April), it was the third consecutive month below the 50 boom/bust level. It did not fall below 50 at all last year. Both, the German and French composite remained below 50, and slowed sequentially.
• While the UK’s flash manufacturing PMI slowed (53.1 vs. 53.9). The services and composite readings also slipped to hold below 50. The composite had slipped below 50 (to 49.7) in May, the first sub-50 reading since October 2023. June’s preliminary estimate is 49.4.
• The three hikes delivered already this year by the Reserve Bank of Australia appear to be slowing the economy. The composite PMI finished last year at 51.0 and June was the third month in the past four that it is below 50 (49.8). The manufacturing PMI rose to 51.2 (from 50.7) and the services PMI stands at 49.9 (from 48.7). Tomorrow, Australia reports May CPI. It likely edged higher (headline and core) but may be near the peak.
• Japanese markets tend not to react much to the PMI series. Still, the takeaway is that the Japanese economy appears to be enjoying if steady but uninspiring growth. The manufacturing, services, and composite PMI rose further above 50. At 52.5 (from 51.1), it is the highest since March. The highlight this week is Friday’s release of Tokyo’s June CPI. The headline and core rates are expected to tick a little higher but will remain below 2%.
Reviewed by Marc Chandler
on
June 23, 2026
Rating:
