Hope of re-opening the Strait of Hormuz fades

US officials have been playing up the possibility of a near-term agreement with Iran.  The market remains skeptical and has extended the recovery in oil prices.  Brent futures are rising for a fifth session and reached $90 a barrel, a seven-day high. September WTI is up nearly $2 today, after rising nearly $4 yesterday and $3 in the last two sessions of last week. 

Rising oil prices are helping lift interest rates, and rising interest rates are helping lift the greenback against most currencies.  Despite US promises to do “whatever it takes” to put a floor under the yen, the market is skeptical.  It has taken the US dollar to a marginally new post-intervention high near JPY159.40 today. As widely expected, the Reserve Bank of Australia delivered its hawkish hold, and this is helping the Australian dollar join the Norwegian krone and Canadian dollar as the only G10 currencies gaining traction against the US dollar today.  Ranges are narrow and the consolidative tone continues. 

Prices 

G10

The euro made marginal new session low in the North America afternoon yesterday near $1.1540 in lethargic turnover and slipped a little further today to almost $1.1530, which was around where it was trading when the US reported the disappointing jobs data last Friday. Last week’s low was near $1.1500.  The euro has been capped near $1.1550 today. 

The action in the foreign exchange market was in the yen yesterday. It was sold.  The greenback rose to about JPY159.35, a new post-intervention high, arguably encouraged by firmer US yields and the 5% rise in September WTI. The dollar has edged a little higher and has held below JPY159.40. The market continues to probe for the pain threshold of officials, encouraged firm higher oil prices and firmer US yields.   

Sterling reached its best level in three-and-a-half weeks yesterday (~$1.3530) after posting a bullish outside up day before the weekend. The $1.35 area corresponds to about the midpoint of this year’s range. It is in a narrow range, straddling the $1.35 area today. Initial support may be near $1.3485. The next upside technical target may be the two-month high set mid-July near $1.3560 and then the (61.8%) retracement of the decline from the late January high (~$1.3870). 

The US dollar traded with a slightly heavier bias against the Canadian dollar yesterday.  It had fallen to almost CAD1.3925 after the contrasting employment reports before the weekend. The greenback held the pre-weekend low yesterday, its lowest level in two months. It is still holding today, while the US dollar has not traded above CAD1.3950 today. The CAD1.3900 area marks the (50%) retracement of the greenback’s rally from the May 1 low (~CAD1.3550) The next retracement level (61.8%) is slightly above CAD1.3815, while the 200-day moving average is near CAD1.3855. 

The Australia Dollar was confined to about a quarter-of-a-cent range below $0.7075 yesterday and finished near its lows. It eased to $0.7040 today but the hawkish hold by the central bank may have helped it recover almost to the session high, a little above $0.7060. Still, it remains in the upper end of the pre-weekend range when it reached almost $0.7080, its best level since June 16. 

EM 

The greenback consolidated in quiet turnover against the Mexican peso yesterday. It enjoyed a firmer bias.  After settling near MXN17.1355 before the weekend, the US dollar spent most of the North American session in a little less than a two centavos range on either side of MXN17.15. It is in the weaker end of the range today. 

The dollar hardly moved yesterday against the offshore yuan yesterday. It traded between about CNH6.7420 and CNH6.7480.  The dollar’s range has been extended to about CNH6.7490 today. After setting the dollar’s fix at a new low since early 2022 yesterday (CNY6.7884), the PBOC set it a little higher today at CNY6.7900.

Rising oil prices and weaker equities is doing the Indian rupee no favors today. The US dollar posted an outside up day against the rupee yesterday and it gapped higher today. Yesterday’s high was about INR95.2875 and today’s low was INR95.3750. It reached a seven-day high today of INR95.4475 and settled slightly below it. A move above INR95.59 warns of near-term risk back toward INR96. 

Other markets

US equities traded heavier yesterday, perhaps weighed down by higher oil prices and higher US rates.  This seemed to drag down most Asia Paciifc equities today, though Japan, South Korea, Taiwan and Australia were exceptions, with the Nikkei gaining 2%, its first gain in three sessions. Europe’s Stoxx 600 is threatening to snap a six-day advance.  US index futures are narrowly mixed.   

Benchmark 10-year yields are extending yesterday’s gain today.   European yields were up mostly 4-6 bp yesterday, are up 2-5 more today. The 10-year US Treasury yield rose to 4.70%, a four-day high. It is edging closer to the high set late July, when it reached nearly 4.75%, the highest since January 2025. 

Gold found support yesterday near $4313 and reached the session high in late North American turnover around $4395 near midday in NY.  This is its highest level since June 5. It reached $4435 today and has reversed lower. It fell slightly through $4357 before stabilizing, but the price action warns late longs may be at risk. Silver managed to rise above its high from the end of last week (~$65.15), as well, and posted its highest settlement since June 17.  The gains initially extended to almost $66.50 before profit-taking kicked in and set silver to about $64.25, where new buying emerged. It is knocking on $65 in late European morning turnover.

Iran’s aggressiveness and the apparent change in US tactics saw September WTI contract reach about $82.30 yesterday. It was the third consecutive session that oil prices rose. Last week’s low was recorded last Wednesday, near $74.25. The contract is extending its gains today and reached $84.60 today. The next technical retracement target is a little above $86. 

Data

In the first half, the US existing home sales fell in three of the six months with the seasonally adjusted annual pace dropping by a cumulative 4.2%. July’s report is due today, and it is expected to show a 1% decline. More interest, of course, is on tomorrow’s July CPI release. A slight moderation in the year-over-year headline and core rate is anticipated. 

Mexico’s monthly industrial output has been in a sawtooth pattern, alternating between increases and decline this year.  True to form, after falling by almost 0.8% in May, industrial production is expected to have edged 0.2% higher in June. Mexico's exports of AI-related hardware and computer equipment to the United States (including commercial servers and data center infrastructure) have surpassed traditional automotive shipments for the first time. Driven by an 84.5% year-over-year surge these technology shipments reached a record $105.8 billion between January and May 2026, overtaking the country's leading auto sector. Is it China? No, Taiwan, who is now Mexico's 3rd largest trading partner (up from 8th in 2022). Taiwan companies assembling in Mexico.

As anticipated, the Reserve Bank of Australia left rates on hold (4.35%). RBA Governor Bullock did not rule out additional rate hikes, after delivering three earlier this year. The yield on the three-year Australian government bond rose a couple of basis points. It was the sixth increase in seven sessions. The futures market has around a 69% chance of a hike before the end of the year discounted. It was about 46% at the end of last week.