Struck Qatari Ship Underpins Oil and Gas Prices, While Strong Samsung Earnings Fail to Stem Chip and AI Profit-Taking

The fragility of the ceasefire in the Middle East was driven home today by the strike on a Qatari LNG ship in the Strait of Hormuz today. Oil and gas prices are higher. Samsung earnings failed to deter profit-taking, which weighed on chip and AI equity names. Still, the South Korean wan jumped 1% to a two-week high as SK Hynix prepares to sell American depository receipts (~$28 bln). The company has said it intends to repatriate some of the funds raised. Japan’s 30-year bond auction drew the highest demand in seven years, though yields recovered from the initial decline. Hong Kong launched a gold clearing and settlement facility today. 

The US dollar is firmer against the G10 currencies but the Japanese yen. It is straddling the JPY162 level in the European morning, where options for $2.2 bln expire later today. Germany reported a 0.9% rise in May industrial output, which was well above expectations and matches the largest increase since March 2025. Still the euro is trading quietly lower. The NATO conference in Türkiye will attract attention. Meanwhile, the market awaits word from the French court whether Le Pen can run in next year's presidential contest. And the $119 bln coupon auctions this week by the US Treasury kick-off with the $58 bln sale of three-year notes today. 

Prices 

G10

• The euro made marginal new session low in North America yesterday, slightly below $1.1410. Important chart support is seen in the $1.1400-05 area. It retested the session high in the North American afternoon, near $1.1450. Last week’s high was near $1.1475, which also corresponds to the 20-day moving average, which is now found slightly above $1.1460. So far today, the euro is in about a quarter-cent range below $1.1450. 

• The yen traded in a narrow range in North America yesterday. The US dollar drifted lower most of the North American session and approached JPY162.00 in late dealings. It peaked today slightly below JPY162.20 and found support a little below JPY161.70. The record intervention in April/May sent the greenback down almost six yen. The 2024 intervention, which was around half of the size of this year’s operation, drove the dollar down about 22 yen. There are $2.2 bln of JPY162 options that expire today and about $820 mln at JPY162.50.

• Sterling posted an ostensibly bullish outside day by trading on both sides of yesterday’s range and settled above it high. It poked above $1.3400 briefly today where sellers lurked and pushed it to $1.3375. Options for about GBP435 mln at $1.3360 expire today. Sterling needs to convincingly overcome resistance in the $1.3400-20 area to signal a move toward $1.3500 next. 

• The Canadian dollar approached last week’s low, but it held, but it still looks vulnerable. In late June, the US dollar tested the CAD1.4250 area. Yesterday’s high was almost CAD1.4240. and the US dollar pulled back to around CAD1.4200 in late dealings. It has been confined to a roughly CAD1.4200-CAD1.4220 range. It will take a break of CAD1.4150 to provide some technical evidence that a top may be in place. 

• For the fourth consecutive session, the Australian dollar is recording higher lows and higher highs. It pushed above resistance near $0.6950 in the North American afternoon and reached $0.6960 today before pulling back to around $0.6935. Sustaining the break targets the $0.7000 area next. The 20-day moving average is nearly $0.6970. The Aussie has not closed above the 20-day moving average since mid-May. 

EM 

• The Brazilian real and Mexican peso were the strongest emerging market currencies yesterday. The Brazilian real was the strongest. It rose by about 0.75% and reached a two-week high. The dollar slipped through BRL5.1300 and settled below the 20-day moving average (~BRL5.15 today) for the first time since June 15. The greenback was turned away from MXN17.50 and was sold through last week’s low seen before the weekend, near MXN17.4180, to approach MXN17.3750. It traded on both sides of last Friday’s range and settled below it low. It closed below the 20-day moving average (~MXN17.4065 today) for the first time since June 17 (FOMC meeting). However, there has been no follow-through, and the US dollar is back above the 20-day moving average. Nearby resistance is in the MXN17.46-MXN17.50 area. 

• The dollar’s advance against the offshore yuan recouped the losses recorded in the previous two sessions. It approached CNH6.80 yesterday and reached CNH6.8030 today. It stalled in front of CNH6.8050 resistance. The PBOC set the dollar’s reference rate slightly above last week’s three-year low today (CNY6.8054 vs. CNY6.8066 yesterday and CNY6.8047 at the end of last week).

• The Indian rupee is firmer today despite the rise in oil prices and weaker equities. today. It has fallen in five of the past six sessions. Today’s 0.45% gain is the largest since June 12. The dollar was sold to a three-day low near INR94.9660, slightly the 20-day moving average (~INR94.8950). At the end of week, the central bank will report the latest weekly reserve figures. In June reserves fell for the second consecutive month a total of about $31.5 bln. 

Other Markets

• The large equity markets in the Asia Pacific region were sold today. Singapore was the main exception (+1.5%). Strong Samsung earnings failed to inspire and South Korea’s Kospi was tagged for nearly 5%. Taiwan’s Taiex and Japan’s Nikkei 225 fell by more than 2%. Europe’s Stoxx is nursing a small loss in late morning trade after falling 0.35% yesterday. The US S&P and Nasdaq composite approached last and week’s high yesterday, but they held. The Nasdaq futures are off almost 0.90% and the S&P 500 futures a little softer.

• Benchmark 10-year yields mostly edged up yesterday and are higher today. The 10-year US Treasury yield was an exception yesterday and was fractionally lower. Today, it is up a couple of basis points to almost 4.49%. The 10-year JGB yield is up 2.5 bp today after jumping about 4.5 bp yesterday. The yield is up about 78 bp this year, more than twice the increase in the US 10-year yield. European yields are mostly around two basis points higher today. 

• Gold initially rose a little above the pre-weekend high yesterday to reach almost $4203 in the Asia Pacific session before retreating a little below $4130 in North America. It fell slightly below $4117 today before stabilizing. Separately, note that Hong Kong launched its gold clearing and settlement system today. The Monetary Authority of Singapore is expected to offer gold vaulting services later this year (October). Silver traded pennies through the 20-day moving average (~$63.20) for the first time in over a month yesterday. But it was greeted by sellers who pushed to back to almost $61.35. It fell about $1 today before bids emerged. 

• August WTI traded between about $67.80 and $69.25 yesterday. The 200-day moving average is slightly below $70.30 and the contract has not settled above it for the past four sessions coming into today. Last week’s low was record before the weekend (~$67) and before the Middle East war began, it settled at $65.70. The attack on a ship today as it was exiting the Strait of Hormuz helped lift the August WTI contract to almost $69.75 today. Meanwhile, Saudi Arabia cut its main crude price for Asia next month and will sell at a discount for the first time since 2020. The $11 a barrel cut will bring the price to $1.50 below the regional benchmark. The move is thought to reflect the speed at which oil producers in the Gulf have boosted flows. 

Data

• The US May trade deficit is set to widen sharply. The preliminary goods deficit rose to $105.8 bln from $83 bln in April. The overall trade deficit is seen widening to $78.5 bln from almost $56 bln. Although one would not know it from much of the political discourse, the US runs a large and persistent trade surplus in services. In any event, the imports likely rose around 2%, like they did in April. Exports are expected to have fallen by the most in seven months. The NY Fed’s inflation survey may draw more attention than usual after Fed Chair Warsh, who eschews forward guidance, told the Sintra audience that inflation expectations have fallen recently. In May, the one-year expectation slipped 0.1% to 3.5% and the three-year and five-year projections were unchanged at 3.0% and at 3.1%, respectively. The one-year breakeven, the difference between the inflation-linked security and the conventional security is near 1.32%. It peaked in late March near 5.43% and was above 2.5% a month ago. The five-year breakeven is about 2.25%. It peaked in mid-March, near 2.78%. It was slipping through 2.50% a month ago. 

• Canada reports May goods trade balance today. April’s C$2.7 bln surplus was the largest since January 2025. The average monthly deficit in the first four months of the year is about C$920 mln compared with an average shortfall of C$1.8 bln in Jan-Apr 2025. The IVEY PMI will also be reported. It typically runs hotter than the S&P iteration. The highlight of the week is the June employment data on Friday, which is unlikely to match May’s nearly 88k increase in employment, the increase of 154k full-time positions and drop in the unemployment rate to 6.6% from 6.9% (steady participation rate, unlike in the US). 

• Mexico reports June auto output and exports today. The market does not appear sensitive to the data. Still, it is interesting to note that Mexico exported almost 90% of its auto output in May. 

• Germany reported a 0.9% jump industrial output figures today after a larger than expected jump in orders yesterday. The median forecast in Bloomberg’s survey anticipated a 0.1% increase. April’s 0.4% increase was halved to 0.2% increase. On a workday adjusted basis, it was flat year-over-year. After posting 0.3% growth in Q1 26, Europe’s largest economy may have stagnated in the quarter that just ended. 

• France’s “twin deficits” are in the news. Today it reported a 6.9 bln euro May trade deficit. The deficit in the first five months of the year averaged 5.27 bln euros down from a 6.5 bln average in Jan-May 2025. Weak growth in France is adding to its fiscal challenges and may see it overshoot its 5% deficit target (5.1% 2025) this year. Meanwhile, a Frenc appeals court is expected to rule today whether Marine Le Pen’s embezzlement case prevents here from running in next year’s presidential contest, which ECB President Lagarde may also be interested in entering. 

• We continue to be struck by the contrast between rising labor earnings in Japan and the continued weak household spending. Reported earlier today, Japan’s labor cash earnings rose 3.2% year-over-year in May and 1.4% when adjusted for inflation. Yet, household spending contracted by 0.4% year-over-year in May (-0.5% in April). It has not risen on a year-over-year basis since last November. Japan reports May current account balance tomorrow. The surplus is expected to have edged up even though the trade balance (BOP basis) is likely to have swung back into deficit after being in surplus Feb-April.

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