Early Monday saw markets reeling from a sharp escalation in Middle East conflict. News that U.S. forces struck Iran’s nuclear sites sent oil prices surging (Brent briefly hit ~$81) and ignited safe-haven flows into the U.S. dollar. Against this backdrop, currencies behaved as expected: The Euro and Pound slid to multi-day lows, while the commodity-linked Canadian dollar lagged even as oil spiked. Investors also mulled central bank signals (Lagarde’s dovish ECB stance, Bailey’s caution at the BoE) and upcoming data (S&P PMIs, U.S. home sales) as they positioned for the week. Key moves:
- EUR/USD – slid toward ~1.1480 (near session lows) as U.S.-Iran war fears boosted the dollar. The ECB’s recent rate cut and “pause” signal capped Euro gains.
- GBP/USD – slipped to ~1.3405 after risk-off flows lifted the Greenback and weak UK retail sales (–2.7% in May vs –0.5% expected) dented Sterling. The BoE held rates at 4.25% but warned the world is “highly unpredictable”.
- USD/CAD – hit fresh highs near the mid-1.3700s on Monday. Safe-haven demand for USD outweighed relief from oil’s jump, even as surging crude (Brent ~$78–81) normally strengthens the loonie.
EUR/USD – Euro under pressure as war fears boost USD
The EUR/USD chart shows euro ceding recent gains. Friday’s ECB meeting delivered another rate cut and Lagarde promised it would likely be the last, yet it did little to cheer markets amid global turmoil. On Monday morning EUR/USD dropped into the 1.1480–1.1500 zone, about 0.5% down for the day so far (versus ~1.1540 on Friday’s highs). Safe-haven flows drove the greenback higher – an early-Asia report noted Euro weakness after Trump joined Israel’s strikes on Iran. With traders eyeing this week’s flash PMI data for clues on growth, the euro faces headwinds: ongoing Middle East uncertainty and a U.S. Fed that just hinted at future rate cuts (underscoring still-hot U.S. inflation) leave EUR/USD skewed lower.
- Chart signal: After topping ~1.1545 last week, EUR/USD fell below key support at 1.1500. The next support sits around 1.1450 (Friday’s low), with resistance near 1.1550 (Thursday high).
- Data/events: Monday had no Eurozone numbers, but ECB speakers are due later this week. US PMIs and existing-home sales were scheduled (forecasts roughly flat) – any upside surprises might prop up the dollar further.
- Political angle: Geopolitical jitters dominated. Bombshell news of U.S.-Iran conflict (safe-haven flows) overwhelmed any calm from Lagarde’s cautious tone. European officials’ insistence on stronger fiscal/military unity (to boost the euro) was only partially comforting.
GBP/USD – Pound bends to global risk and weak UK data
GBP/USD similarly tumbled on Monday. Early Asia trading saw the pair dip near 1.3405, extending Friday’s pullback from 1.3515. Two factors hit Cable hard: first, the same Middle East escalation that buoyed the dollar, and second, poor UK retail sales. May retail sales plunged 2.7% MoM (versus a small ~0.5% dip expected), stoking bets that the BoE will be on hold or even ease by late summer. Indeed, the Bank of England kept rates at 4.25% last week, emphasizing a cautious outlook amid a “highly unpredictable” world. All told, traders loaded up on dollars (and yen, gold etc.) and stepped back from Sterling.
- Chart signal: The GBP/USD chart shows a bearish bias: after failing around 1.3515 on Friday, Monday broke local support at 1.3450. Near-term resistance is 1.3450–1.3500, with support down at 1.3350 (the June low).
- Data/events: UK preliminary June PMIs are due Monday (not yet out by morning). Any weak print would compound pressure on the pound. U.S. data this week (housing, Fed speakers) may keep USD elevated.
- Political angle: The GBP weakness underscores UK’s challenges: sluggish spending, political unpredictability (an upcoming election is looming), and the global risk-off mood. Governor Bailey’s comments – hinting inflation may come down but markets are uncertain – set the tone for a softer sterling into year-end.
USD/CAD – Loonie slips as dollar demand tops out oil gains
The USD/CAD chart shows the U.S. dollar strengthening to near 1.378 in early Monday trading. This capped a five-day rally for USD/CAD: it bottomed around 1.3540 mid-June, but has since climbed as global risk aversion fueled demand for USD. Normally surging oil (Brent hit ~$78 on Monday) gives CAD a boost, but this time geopolitical fear trumps. Canada’s fundamentals are little help on Monday; overnight the loonie simply played second fiddle.
- Chart signal: USD/CAD’s Friday low (~1.3715) was cleared, with the pair eyeing a test of resistance around 1.3820 (the May peak). A break back above 1.3820 would target 1.3920–1.4000. Support is now near 1.3700 and 1.3620 (mid-June swing low).
- Data/events: There was no Canada data on Monday, but Wednesday brings U.S. FOMC member Waller’s remarks (market-moving? maybe). On Thursday, Canadian wholesale sales (slightly negative last report) could sway CAD.
- Political angle: Oil’s spike reflects global unrest, and Canada’s oil-heavy economy can’t ignore that. However, today political risk is overshadowing commodity fundamentals. If Middle East tension eases, a price reversal could strengthen CAD back toward pre-crisis levels. For now though, USD/CAD is tracking global “risk-off” cues more than Friday night’s energy news.