US Home Sales Rebound, Supporting USD Amid Cooling Inflation

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

US Dollar        1.3590-1.3830

Euro                 1.5770-1.6020

Sterling            1.8530-1.8770

WTI Oil (opening level) $65.91

The CAD/USD is opening at 1.3710 ( 0.7294 )

CAD is reacting to the latest Consumer Price Index (CPI) data, which showed inflation steadying in May.

Canada’s May inflation data showed that the BoC CPI rose by 0.6% (MoM) in May, slightly above the previous reading of 0.5%. The YoY figure held steady at 2.5%. 

The headline CPI matched expectations, rising 0.6% (MoM) and 1.7% (YoY). 

The BoC Core CPI, which strips out volatile components such as food and energy, is viewed as a more accurate measure of underlying inflation. 

What does this mean for the Bank of Canada?

With the BoC holding its key rate at 2.75% during the June policy meeting, BoC Governor Tiff Macklem raised concerns over tariffs and rising input costs.

The stronger monthly core print signals persistent price pressures, which could lead the Bank of Canada to delay rate cuts as it continues to monitor inflation dynamics and their implications for monetary policy. With Core CPI still above the BoC'S 2% target, Canadian OIS market data shows a 38% probability of a rate hold at the July meeting.

Headlines

·    Crude prices slumped and risk sentiment improved after Iran appeared to opt for a mostly symbolic response to the US bombing by flagging in advance a limited strike on a US base in Qatar caused no casualties, and after Trump announced a ceasefire timeline for "The 12-Day War" between Israel and Iran.

·    Fed's Bowman, echoing Waller, suggested a divide among FOMC members and is open to a July rate cut if inflation remains contained. She emphasized focusing on job market risks and noted minimal impacts from trade policy on inflation. Bowman is the second Governor to signal a willingness for a July cut.

·    S&P Global US Composite PMI fell slightly to 52.8 in June from 53 in May, indicating a mild cooling in private sector growth but marking the 29th month of expansion. Service sector output eased to 53.1, while manufacturing remained steady at a 15-month high of 52.0.US existing home sales increased by 0.8% in May 2025 to an annualised rate of 4.03 million, rebounding from a 0.5% decline the previous month and surpassing market expectations of 3.96 million units.

·    US existing home sales increased by 0.8% in May 2025 to an annualised rate of 4.03 million, rebounding from a 0.5% decline the previous month and surpassing market expectations of 3.96 million units.

Key Points

·    Equities: US rebounds, tech leads, Europe mixed, Asia rallies on ceasefire

·    Volatility: VIX retreats, hedging cheaper, focus on PCE and Powell

·    Digital assets: Bitcoin rebounds, ETHA sees outflows, IBIT stable, risk-on tone

·    Fixed Income: US treasuries rally on Fed comments, oil price swoon

·    Currencies: USD bear returns with a vengeance as another Fed official mention of July rate cut

·    Commodities: Crude tanks as geopolitical risks subside