Marc to Market Marc Chandler on Global FX and Capital Markets

US Dollar Losses Yesterday Have Been Mostly Sustained Today

2026-07-16T06:49:15.729-04:00

There seems to be a nervous calm in the foreign exchange market. The US dollar is mostly in narrow ranges around little changed levels. The euro, for example, is in about a 15-tick range and the greenback is confined to less than a quarter of a yen range. Despite the slightly stronger than expected May UK GDP (0.1%) sterling is among the heaviest of the G10 currencies and is testing $1.35 late in the European morning.

The news stream is light. The eurozone reported its first monthly trade deficit in a little more than three years. Weekly portfolio flow day showed Japanese investors bought the most foreign bonds last week since May, while they continued to buy foreign stocks. The US reports June retail sales are expected to have risen by about 0.4% excluding autos and gasoline. Two Fed Presidents (Logan and Schmid) speak during the session. Governor Jefferson speaks tonight. The blackout period ahead of the FOMC meeting begins this weekend.

Prices

G10

• The US two-year yield has fallen by about 15 bp in the past two sessions, the biggest two-day decline since last August. The euro recovered from slightly below $1.1380 on Tuesday to almost $1.1485. It finally rose above the high recorded in response to the soft US jobs data on July 2 ($1.1475). It is in a narrow range today of about $1.1460-75. Options for nearly 2 bln euros at $11.475 expire today. The next target is in the $1.1500-10 area. If the euro has forged a base, initial potential may extend into the $1.1600-50 band.

• The yen seems largely sidelined, confined largely to a range set five days ago. The dollar traded in a little more than a half a yen range yesterday and is in less than a quarter yen range today mostly above JPY162. We are struck by the divergence between Japanese retail accounts that have established a large net short dollar position and the most recent Commitment of Traders, which showed a substantial net short yen position. A nearly two-week up trendline comes in near JPY161.90 today.

• Some linked sterling’s strength to speculation that Monday when the UK gets its 7th PM in the decade since the Brexit referendum Home Secretary Shabana Mahmood will be named Chancellor of the Exchequer. Her centrist and fiscal discipline appeals to investors. However, the market may be getting a little ahead of itself, after all, Reeves, the current chancellor, was also regarded as moderate and fiscally conservative. Sterling rose about 1.1% yesterday to almost $1.3560, its best level in two months. Even with the slightly better than expected May GDP, sterling has not been able to advance further today. It is trading between about $1.3505 and $1.3545. As we previously noted, the $1.3500 area marks the halfway point of this year’s range. Options for about GBP940 mln expire there today.

• Helped by the continuing narrowing of the US two-year premium over Canada, the Canadian dollar extended its recent gains yesterday and reached its best level in a month. The US dollar was sold to CAD1.4025. The US two-year premium narrowed slightly yesterday and approached 130 bp, the smallest since June 11. The greenback has held on to most of yesterday’s gains and has been confined to about CAD1.4035-CAD1.4055 range so far today. Options for $645 mln at CAD1.4050 expire today. If the US dollar is “correcting” the two-month advance, the (38.2%) retracement is near CAD1.3980 and the 50% is about CAD1.39. For the second consecutive session, the greenback settled below the lower Bollinger Band (which comes in near CAD1.4055 today).

• The Australian dollar reached $0.7020 yesterday, its best level since June 22. The five-day moving average crossed above the 20-day moving average on Tuesday for the first time in two months. It is in a little more than a 10-tick range around $0.7000. The next target is around $0.7535 and then $0.7575. It approached the upper Bollinger Band yesterday (now ~ $0.7015) but held below it.

Emerging Markets

• Lower US rates, a broadly softer dollar, and firm equities helped lift the Mexican peso yesterday to its best level since June 22. The dollar was sold to about MXN17.3575 and the five-day moving average crossed below the 20-day moving average for the first time in a month. The next target is in the MXXN17.20-MXN17.25 area, though a consolidative tone is evident today and the greenback has risen to almost MXN17.42. While the Mexican peso gained about 0.30% yesterday, the Colombian peso rose by about 1% to a new high since early 2020. The US dollar traced out a large outside down day, trading on both sides of Tuesday’s range and settling below its low. The peso has risen almost 16% since the mid-May (presidential election was at the end of May).

• The broadly weaker dollar was also reflected in the offshore yuan, which rose to its best level since June 18. Recall, that the previous day, at the conclusion of the FOMC meeting, that the greenback recorded a three-year low near CNH6.7540. The dollar is holding above about CNH6.7650 today. The PBOC shaved the dollar’s fixing today by the slightest among possible. (CNY6.7909 vs. CNY6.7910 yesterday). Year-to-date only the onshore yuan has risen by about 3.25% against the US dollar, the most among the emerging market currencies. Only two G10 currencies, the Australian dollar and Norwegian krone have done better.

• The Indian rupee continued to grind lower today. It reached a new low since May 22. The dollar reached nearly INR96.3740. The dollar’s record high (May 20) was about INR96.9650. It may not have been helped by the swing of the current account into deficit in May (-$2.0 bln vs. +$700 mln a year ago). In April, India recorded a current account surplus of $4.7 bln.

Other Markets

• US equity indices closed firmer yesterday. The S&P 500 is within striking distance of the record high from June 2 (~7621). The Nasdaq settled at its best level so far this week. It settled near 26265 yesterday and its record high from June 1 was 27190. US index futures are trading heavier today. The large Asia Pacific bourses fell today, with the notable exception of Hong Kong and the mainland shares that trade there. South Korea’s Kospi slid nearly 6.4%. Europe’s Stoxx 600 is off nearly 0.5%, which more than offsets the net gain over the past three sessions.

• The 10-year US Treasury yield fell for the second consecutive session yesterday, the first back-to-back decline this month. The yield was turned back from above 4.60% at the start of the week. Gilts caught a late bid yesterday amid speculation about the next Chancellor of the Exchequer. However, yields are 1-3 bp higher in Japan, Europe, and the US today.

• Gold traded quietly yesterday. If recovered from the lows, a little below $4018 and reached session highs after punching through $4080. It is lower today and reached almost $4023 before stabilizing. Silver traded a bit heavier than gold and could not quite get into positive territory in the North American afternoon. It languishes in its recent trough and slipped to a new low for the month slightly below $56.60.

• August WTI traded sideways yesterday within Tuesday’s range. The consolidation looks constructive. An off-ramp to the conflict seems increasingly elusive. It is within yesterday’s range today and little changed in late European morning turnover near $79.50. For a currency strategist with a sense of history, bombing Iran into submission seems fraught with risk and not a high probability success strategy. And, even if the US and Israel can prevent Iran from acquiring nuclear weapons, the lessons from Ukraine and now Iran may boost the desire of other countries to get the capability. The longer-term goal of non-proliferation is being put at risk, more so than China, a nuclear power, testing a submarine launch missile, as it did recently.

Data

• US June retail sales likely slowed after a strong May but were likely skewed by the drop in gasoline prices. The median forecast in Bloomberg’s survey anticipates a 0.2% increase after a 0.9% jump in May. Excluding autos and gasoline, a 0.4% rise is expected after a 0.5% gain in May. May business inventories are due. The rebuilding of inventories in Q1 was important. It was the largest quarterly increase since Q2 24. The projected 0.3% increase would maintain the Q1 pace. Lastly, June pending home sales were unlikely to have sustained May’s heady 3.8% jump. A small decline would not be surprising.

• Canada reports June housing starts. They are expected to have declined, which would be the first back-to-back decline since February-March last year. Through May, Canadian housing starts are running about 2.8% the year ago pace.

• The eurozone reported that the May trade balance fell into deficit (~5 bln euros) on a seasonally adjusted basis, the first monthly shortfall since April 2023. In the first five months of the year, the average monthly surplus was about 2.6 bln euros. In the Jan-May 2025 period, the average monthly trade surplus was about 16.7 bln euros.

• The UK eked out 0.1% growth in May after it contracted by 0.1% in April. The three-month pace slowed to 0.7% from 0.8%. Industrial production contracted by 0.5% after April’s 0.2% decline was revised to flat. However, manufacturing output rose by 0.1% after a revised 0.5% increase in April. Construction output remained weak (-0.8% vs. a revised 0.1 decline in April. It initially rose by 0.1%). The 0.3% increase in services was the key to May’s growth. activity stabilized (0.1% vs. -0.2%) and the trade deficit narrowed. The Bank of England meets on July 30, but it still seems too early for a hike. The swaps market has a little more than 14 bp discounted for the following meeting (Sept 17), which is down from almost 19.5 bp on Monday.

• Japan’s weekly portfolio flow report (through July 10) showed Japanese investors bought slightly more than JPY1 trillion of foreign bonds last week, the largest haul since early May. They bought a small amount of foreign equities (~JPY200 bln) for the fourth consecutive week.

Disclaimer

US Dollar is Mostly Firmer, August WTI Recovers above $80, and China's GDP Disappoints but New 3-year Low Dollar Fix

2026-07-15T06:47:05.189-04:00

The US dollar is mostly firmer today, but largely within the well-worn ranges seen recently against most of the G10 currencies. The news stream is light, but the US has stepped up the strikes against Iran, and August WTI is back around $80 a barrel. The eurozone’s May industrial output unexpectedly fell, while Japan May industrial output was revised lower but activity in the service sector improved. China’s Q2 GDP disappointed, though June retail sales and industrial output were firmer than expected.

Earlier this month, the US reported disappointing jobs growth in June and yesterday reported a softer than expected June CPI. After Federal Reserve Governor Waller’s seemingly hawkish comments on Monday, there was increased speculation of a rate hike as early as this month’s FOMC meeting. After the CPI, the odds were more than halved. Fed Chair Warsh maintained his hawkish line and commitment to bring inflation down in his testimony before Congress yesterday. He returns to testify before the Banking Committee today. The questions will differ, but the answers will remain the same.

Prices

G10

• On July 2, the euro recovered from $1.1375 to $1.1475 after the disappointing US June employment data and has remained in that range ever since. With the help of a softer than expected US CPI, the euro moved from the lower end of the range to the upper end. Yesterday’s favorable price action was marred by the euro’s inability to settle above Monday’s high (~$1.1445) and the 20-day moving average (~$1.1415 today). So far today, it is trading in a narrow range. The euro has held below yesterday’s high and was sold to almost $1.1410 late in the European morning. Options for about 845 mln euros at $1.1420 expire today.

• Yesterday, the dollar was mostly confined to Monday’s range against the Japanese yen. The dollar was confined to about a 40-tick range on both sides of JPY162.00. It is inside that range today but looks poised to push above yesterday’s high. The 40-year high was recorded on July 1 near JPY162.85. Finance Minister Katayama seems to be determined to boost domestic demand for Japanese bonds, as higher yields do not seem sufficient (yet)

• Sterling traded in about a cent-range yesterday between about $1.3340 and $1.3445. It stalled in front of last Friday’s high ($1.3450). It settled firmer on the day but below $1.3400. It is in about a 20-tick range on both sides of $1.3400 today, where options for about GBP640 mln expire today, but looks set to extend the range to the downside. The euro fell for nine of the past ten sessions coming into this week against the euro but recorded its first back-to-back gain in nearly a month. It is little changed today.

• The Canadian dollar rose by almost 0.70% yesterday, its best day since the end of April. The US two-year premium that trended higher in May and June, which the exchange rate tracked, has fallen by almost 10 bp since the start of the month and about half of it was recorded in response to the softer US CPI. The US dollar was sold slightly through CAD1.4050, its lowest level since June 17 (Fed Day). It slipped to CAD1.4040 today but has come back bid in the European morning and reached almost CAD1.4070. Initial resistance is seen in the CAD1.4080-CAD1.4100 area.

• The Australian dollar rebounded from the dip below $0.6920 and reached slightly above $0.6990 after the US soft inflation report. That is a three-week high and posted its highest settlement since June 22. It continues to press against the high today. Nearby resistance is seen in the $0.7000-$0.7020 area.

• The Mexican peso had its best day here in July, rising by about 0.55% against the dollar and reached a five-day high yesterday. The greenback was sold and briefly traded below MXN17.39. The US dollar held above last week’s low (~MXN17.3750). It is consolidating today in a roughly MXN17.4040-MXN17.4340 range. The Brazilian real’s 1.2% gain led the emerging market currencies yesterday. The dollar settled below BRL5.10 for the first time in almost a month. Last month’s low was slightly above BRL5.0.

• The offshore yuan reached its best level since the day after last month’s FOMC meeting concluded. The greenback frayed support near CNH6.77 twice yesterday and dollar buyers emerged. It slipped to CNH6.7655 earlier today and reached CNH6.7775 in Europe. There may be near-term potential to CNH6.7800-20. Given the broad dollar decline yesterday, the PBOC seemed to have little choice and set the fix at a new three-year low (CNY6.7910 vs. CNY6.7990 yesterday).

• The dollar’s broad pullback yesterday and the stabilization of oil failed to deter Indian rupee selling. The dollar gapped higher on Monday and Tuesday, and extended the gains today to INR96.2825, its highest level since May 22. The record high was recorded on May 20 near INR96.9650.

Other Markets

• Equities are mostly firmer today. The Nasdaq led yesterday’s equity advance with a 0.90% gain. The S&P 500 gained about 0.4% to recoup almost half of Monday’s loss. Dow Industrials eked out a negligible gain. Outside of Chinese markets, which traded a little softer, the large Asia Pacific markets rallied today with South Korea’s Kospi raising 6.25% and Taiwan’s Taiex up 2%. Hong Kong and mainland companies that trade there rose 1.4% and 1.0%, respectively. Europe’s Stoxx 600 is straddling unchanged levels, while US index futures are firm.

• The rally in US bonds following the softer than expected CPI helped European bonds pare earlier losses yesterday. However, they have bounced back by mostly 2-3 bp today. The three basis point decline in the US 10-year yield was the most in about three weeks. It is 1-2 bp firmer today and back above the 4.60% mark. The US two-year yield dropped nine basis points and unwound in full Monday’s jump. Today, it is a couple of basis points firmer near 4.22%.

• It may seem counter-intuitive, but gold rallied by about 1.25% yesterday after the softer than expected US CPI. It was the biggest rise since the July 2 disappointing US jobs data. The rally stalled within less than 50 cents of the 20-day moving average (~$4100 today). It is consolidating between about $4017 and $4062 today. Silver traded on both sides of Monday’s range but the close was well in the range, seemingly neutralizing the potential technical signal. It is softer today, mostly in a $58-$59 range but looks vulnerable to new losses.

• August WTI reached the session high yesterday slightly above $81.25 shortly before the North American session began. It was sold to about $77.85 before midday in New York. It settled firmly albeit slightly below $80. It is trading between $79.30 and almost $81 today and is hovering near $80 in late European morning activity.

Data

• Following yesterday’s June CPI, the US reports PPI today. A flat headline reading will allow the year-over-year rate to slip to 6.2% from 6.5%. The core measure may increase by 0.3%, which would lift the year-over-year rate to 5.2% from 4.9%. The July Empire State manufacturing survey is due at the same time and is seen rising to 9.7 from 5.7. Recall that May’s reading of 19.6 was a four-year high. Late in the session, the Fed’s Beige Book will be released.

• Ahead of the Bank of Canada’s decision (9:45 AM ET), StatCan reports June existing home sales and May manufacturing sales. The Canadian economy contracted 1.0% in Q4 25 and by 0.1% (annualized rates) in Q1 26. However, the economy appears to have returned to growth in Q2 and the median forecast in Bloomberg’s survey is for 1.9% (Atlanta Fed’s GDPNow tracker puts US growth at 1.3% in Q2). The swaps market expects the Bank of Canada to stand pat through Q3 and has a clear bias toward a hike late this year.

• The eurozone’s May industrial output was surprisingly soft. Instead of rising by 0.2% it fell by 0.2%. The sting was only slightly blunted by the upward revision in April to 0.3% from 0.1%. Recall that national figures showed better than anticipated activity in Germany and Spain (0.9% and 1.2%, respectively), while French industrial output slipped by 0.1% and Italy’s fell by 0.3%.

• Japan revised down its initial 0.5% estimate for industrial output in May to 0.1%. In the first five months of the year, Japan’s industrial production increased by a monthly average of 0.5% compared with a 0.2% average in the Jan-May 2025 period. May core machine orders tumbled 12.4% after an 8.7% increase in April. The median forecast in Bloomberg’s survey was for a 4.2% decline. On the other hand, May’s tertiary industry index (services) jumped by 1.1% (0.4% expected), though the April series was revised to a 0.8% gain from 1.3% initially. The BOJ meets at the end of the month. After last month’s hike, the swaps market sees virtually no chance of a hike, though another hike appears to be nearly fully discounted at the end of the year.

• China’s data disappointed. It reported the economy grew by 0.9% quarter-over-quarter in Q2, down from 1.3% in Q1. The year-over-year pace slowed to 4.3% from 5.0%. Still June industrial product and retail sales were stronger than expected. Retail sales from 1.0% year-over-year. It had been expected to continue to contract after the 0.6% year-over-year decline in May. Industrial output rose 5.3% year-over-year, up from 4.5% in May. On a year-to-date, year-over-year measure, retail sales slowed to 1.3% from 1.4% and industrial output was unchanged at a 5.4% pace. Fixed asset investment and property investment contracted at a faster pace. New and used house prices continued to decline. Property investment’s contraction deepened. The GDP deflator rose 1.6% in Q2 after three years are deflation readings. It appears spurred by higher energy costs and sectors linked to AI. Separately, China reported that new yuan loans and aggregate financing improved in June but not as much as economists expected. The poor economic readings will spur speculation of new stimulus measures from Beijing.

Disclaimer