USD Gains Ground Amid De-escalating US-EU Trade Tensions

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.3640-1.3880

Euro                 1.5520-1.5750

Sterling            1.8550-1.8770

WTI Oil (opening level) $61.31

The CAD/USD is opening at 1.3767 ( 0.7264 ) 

The USD/CAD pair gains to 1.3760's during overnight trading hours. The USD gained ground due to de-escalating trade tensions between the European Union and the United States.

The US Dollar Index, which gauges the Greenback’s value against six major currencies, jumped to 99.39 from the monthly low of 98.70 posted on Monday.

On Monday, trade tensions between the EU and the US were also diminished and expectations that both economies would reach a potential bilateral deal had increased after comments from European Trade Commissioner in which he stated that the EU Commission remains “fully committed to constructive efforts at pace towards an EU-US deal”.

Headlines

·    According to Reuters sources, Japan’s Ministry of Finance sent a questionnaire to JGB auction market participants to possibly tweak the amounts of bonds it issued at the long end of the yield curve – sending Japanese yields and the Japanese yen lower (more below under Fixed Income).

·    Bloomberg reported yesterday that the EU has agreed to accelerate negotiations on terms of trade with the US, a move likely prompted by Trump’s threats ahead of the weekend to slap 50% tariffs on EU imports on June 1 (that threat was suspended until July 9, but now hangs over the trade talks).

·    Sales of new single-family homes in the US rose by 10.9% to 743,000 units, exceeding expectations of 692,000. This marks the largest increase since August 2022 and the highest sales since February 2022, driven by builder incentives despite rising mortgage rates.

·    China's industrial profits rose 3% in April from a year earlier, up from 2.6% in March, driven by a government trade-in program driving demand for manufactured products despite pressure from higher U.S. tariffs.

Key Points

·    Equities: Trump delays tariffs; EU stocks rebound; tech, autos in focus

·    Volatility: VIX spikes, VIX futures drop; contango holds; NVDA/PCE ahead

·    Digital assets: BTC steady; IBIT strong flows; crypto stocks weak

·    Fixed Income: Long Japanese Government Bond yields swoon on story that MoF may tweak auction sizes to avoid pressure on market.

·    Currencies: USD rebounded overnight, led by USDJPY on JGB yield plunge.

·    Commodities: Technical selling weighing on gold and silver, and supply concerns on crude