Geopolitical Risks Return to Markets as Iran Threatens Key Shipping Routes

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

US Dollar        1.3710-1.3960

Euro                1.6000-1.6250

Sterling           1.8520-1.8770

WTI Oil (opening level) $91.13

The CAD/USD is opening at 1.3839 ( 0.7226 )

The US dollar edged lower as oil prices surged and US ISM manufacturing data came in stronger than expected. Overall, the moves have remained relatively contained.

USD/CAD continues to trade in a narrow range.

Headlines

• Iran halted contacts with Washington after Israeli strikes in Lebanon and is weighing with allies closing the Strait of Hormuz and Bab el-Mandeb. Trump says talks continue and a deal on Hormuz could come within a week. Lebanon wants any extended Hezbollah–Israel ceasefire to cover all its territory.
• US ISM Manufacturing beat expectations in May, but prices paid stayed above 80 for a second month, the first time since the post-Covid period, underscoring sticky inflation.
• Canada’s manufacturing PMI held in growth at 52.9 in May, just below April’s 53.3. Output, new orders, and employment rose on stronger demand, but input and output prices neared four-year highs, supply chains were hit by Middle East disruptions, and business confidence stayed subdued.
• US construction spending rose 0.4% m/m in April 2026, its second straight increase and above expectations, lifting the y/y gain to 0.9%. Private and public spending both rose 0.4%, with single-family housing up 1.4% while multi-family and private non-residential dipped.
• Germany’s manufacturing PMI was revised up to 50.1 in May 2026 from 49.9, signaling near-stagnation and a four-month low, as new orders fell, prices saw their biggest rise since June 2022, output growth slowed, job cuts deepened, and business expectations stayed muted but slightly improved from April.
• Switzerland’s GDP grew 0.4% q/q in Q1 2026, below the 0.5% estimate. Industrial output rose on stronger manufacturing, but chemicals and pharma slumped, pulling goods exports down. Services growth was modest, with gains in transport and finance offset by weaker trade, retail, and tourism. Domestic demand was flat, as higher government spending was offset by lower investment, and imports fell on soft demand.
• Germany’s retail sales fell 0.3% m/m in April 2026, their fourth straight decline but slightly better than forecasts. Non-food and online sales dropped sharply, while food sales rose 3.2%. On the year, sales were down 0.2%, pointing to weak consumer demand despite easing inflation.

Key Points

• Equities: US equities reached fresh records on AI optimism, Europe softened on energy concerns, while Asia slipped on renewed Middle East tension.
• Volatility: VIX higher, payrolls week, JOLTS today
• Digital Assets: Bitcoin at seven-week low, IBIT weaker than ETHA, miners outperform.
• Commodities: Crude oil swings on headlines, gold reclaims USD 4,500, corn leads grain market lower
• Fixed Income: US bond yields soften following Monday’s crude and ISM-led spike
• Currencies: Dollar pauses; USDJPY nears 160 despite record Japanese FX intervention efforts