The US dollar is mixed but mostly firmer and it looks poised to finish the week on a firm note. Japan’s finance minister threatened to take “decisive action” if necessary, but the yen failed to respond. The yen is weakest for the fourth week in the past five, though volatility is low. The UK will have a new prime minister on Monday, and the prospect of a market-friendly Chancellor of the Exchequer has spurred a Gilt rally, the same was thought of the current Chancellor a couple of years ago.
Prices
G10
• The euro trended lower in North America as the greenback seemed top benefit from a safe haven appeal after reports that Iran has urged to Houthis to close the Strait of Bab El-Mandeb, if the US strikes Iran’s power grid. If so, the dollar reacted more than crude oil prices. In any event, after it reached almost $1.1485 on Wednesday, the euro returned to almost $1.1430 in the North American session. It has held above it so far today but has been unable to push much above $1.1450. The euro settled near$1.1415 last week.
• The Japanese yen slipped to a one-week low yesterday. On an intraday basis the dollar has frayed the 20-day moving average but has not settled below it since mid-May. It is found a little above JPY162.00 today. The dollar reached JPY162.55 yesterday, shouting distance of the 40-year high recorded on July 1 (~JPY162.85). It is trading mostly between JPY162.15 and JPY162.50 today. Options for about $540 mln at JPY162.00 expire today. New threats by the finance minister to “take decisive action” failed to move the market. The yen’s historical (actual) volatility over the past two weeks is near 4.4%, which is low in relative terms compared with the G10 currencies, and in absolute terms for the yen itself.
• The broadly firmer dollar and the lack of confirmation of the next prime minister’s Chancellor saw sterling give back about half of Wednesday’s surge. Sterling pulled back from almost $1.3560, the high since May 12 to $1.3460. Last week’s high was ~$1.3450. It has fallen to almost $1.3435 today. The $1.34 area may offer solid technical support. It corresponds to a (38.2%) retracement of sterling’s rally since the late June (when it reached ~$1.3140) and the 200-day moving average.
• Initially, the Canadian dollar rose to its best level since mid-June yesterday but it could not sustain the momentum in the face of risk-off, the broadly firmer greenback, and the slight widening of the US two-year premium (to a new three-day high). The US dollar held psychological support and recovered from CAD1.4010 to almost CAD1.4060 but remained below Wednesday’s high was (slightly above CAD1.4075). The greenback is consolidating between about CAD1.4025 and nearly CAD1.4050. Options for ~$475 mln at CAD1.4015 expire today.
• The Australian dollar traded in less than a 15-tick range yesterday on both sides of $0.7000. It reached about $0.7020 on Thursday, the high since June 22. It has slipped to a three-day low today near $0.6965. Last week, it settled near $0.6955.
EM
• The dollar recovered from MXN17.3575, Wednesday’s low to MXN17.46 yesterday. The Mexican peso’s roughly 0.3% decline yesterday was among the smallest in the region. Only the Argentine peso rose in Latam and the Chilean peso slipped by 0.1%. The Brazilian real come under the most pressure in the region (-0.6%) following news that Lula was edging ahead in the polls, and the US was lifting the tariff om most Brazilian imports to 25% (effective next week). The dollar gapped higher against the Brazilian real and regained a foothold above BRL5.10. The dollar is probing the MXN17.48 area in Europe today. The week’s high (~MXN17.54) may draw prices.
• The dollar consolidated yesterday within Wednesday’s range against the offshore yuan. The greenback settled firmer but below the five-day moving average, for which it has settled below since last Thursday. However, the US dollar is firmer today, above the five-day moving average (~CNH6.7760) and pushed above CNH6.78. The next chart area may be CNH6.79. After setting the dollar’s fix yesterday at ever so slightly new three-year low (CNY6.7909), it was lifted to CNY6.7934 today. Last Friday’s fix was CNY6.7989.
• The dollar rose to a new high for the week against the Indian rupee today (~INR96.4065). The central bank governor underscored inflation risks stemming from the Middle East war and the prospect of a weak monsoon season. Indian equities are among the strongest in the world today, with its key indices rising more than 1%. The dollar settled slightly above INR96.28 compared with INR95.3250 last week.
Other Markets
• Yesterday’s losses in US equities, reports of China’s new AI, and the rotation out of chips have sparked sharp losses today. The Nikkei 225 was off 4%, while Taiwan and South Korea’s main indices were off more than 6.25%. China’s CSI 300 shed 3.6%. Europe’s Stoxx 600 is snapping a three-day advance with around a 0.8% pullback in the morning. It is now about 0.4% lower on the week after a1.75% loss last week. US index futures are lower, with the Nasdaq off around 1.75% and the S&P 50 off nearly 1%.
• Benchmark 10-year yields are edging lower today. The 10-year JGB yield slipped almost two basis points to ~2.68%, while European rates are mostly lower, led by a nearly three basis point decline in the UK Gilt yield. Perhaps, the speculation that Mahmood may be named the next Chancellor continues to support the Gilt market. The 10-year US Treasury yield is off three basis points to almost 4.52%. It is off about 10 bp this week.
• Gold was sold to a new low for the week in early North American turnover yesterday, slightly below $3970. It has come back firmer today but is straddling the $4000 area. This week’s ~3% loss is the largest since early June. It has fallen in six of the past seven weeks. Silver slumped to a new low for the year yesterday near $55.40 and settled near its lows. Follow-through selling pushed it to almost $54.75 today. Last week, it settled around $59.85. Gold settled last week near $4200.
• August WTI continues to trade within Tuesday’s range yesterday (~$77.85-$81.25). Ahead of the unpredictable weekend, it is trading firmly near $80.70 late in the European morning. The contract settled near $71.40 last week.
Data
• The US economic diary is jammed today. June import and export prices softened given what happened top energy prices, excluding oil, import prices likely rose. They will be overshadowed by June housing starts that will be released at the same time. May housing starts tumbled by 15.4% and likely snapped back to recoup the lion’s share of the decline. June industrial production and manufacturing output will be reported shortly after the housing starts. Both the broader measure and manufacturing likely increased. Lastly, the University of Michigan’s preliminary July reading is due. Sentiment is expected to have improved for the second consecutive month but that was before the re-escalation of the war in the Middle East. Inflation expectations may not have changed significantly.
• Canada reports May portfolio flows today. Foreign demand for Canadian stocks and bonds has increased markedly in the first four months of the year. Foreign investors have accumulated about C$104 bln of Canada’s financial assets compared with net sellers of about C$17.3 bln in Jan-April 2025.
• Following yesterday’s aggregate eurozone May trade deficit, today the eurozone’s May current account surplus was reported today. It improved to 25.1 bln euros from a revised 17.5 bln euros in April. The current account surplus in the Jan-May period was about 120.55 bln euros compared with about 111.5 bln euros in the year ago period. The ECB projects the current account surplus will narrow to 1.3% of GDP this year from 1.7% in 2025.
Reviewed by Marc Chandler
on
July 17, 2026
Rating:
