USD
The dollar is on the back foot this morning, with the near 100.8 after falling nearly half a percent on Tuesday. The move lower came largely in response to June CPI, which showed headline prices easing -0.4% MoM, a much sharper decline than the -0.1% anticipated by economists. That leaves the annual inflation rate at 3.5% YoY, down from 4.2% in May, while core eased to 2.6% YoY with a flat monthly print. As we noted in our reaction piece, though, Chair Warsh’s concurrent testimony leaned hawkish, stressing that a single favourable reading would not change the outlook, helping the buck trim losses late on. Overnight, Iran and the US continued to trade strikes, albeit Trump confirmed talks with Tehran are ongoing. Today brings June PPI at 13:30 BST, Warsh’s second testimony at 15:00 BST, and the Beige Book. Given our unchanged call for the Fed to stay on hold this year, we still see dollar risks skewed lower as rate hike bets unwind.
EUR
The euro firmed on Tuesday despite Bastille Day-thinned liquidity, leaving trading in the low-1.14s this morning. That price action remains consistent with our view that euro upside should stay capped while Hormuz disruption persists, given the bloc’s reliance on imported energy. Markets continue to price roughly 45bp of further ECB tightening this year on top of June’s hike; though we still think next week’s meeting comes too early for another move, a sustained closure of the Strait keeps September firmly on the table. Today’s domestic calendar is light, meaning US PPI and Warsh should dominate direction, posing modest upside risk for EURUSD if pipeline prices confirm yesterday’s disinflation signal.
GBP
climbed through 1.34 on the soft US CPI print, gaining around 0.4% on Tuesday before paring into the close. Domestically, Governor Bailey told MPs that the renewed US-Iran conflict has so far had a limited impact on inflation and described a fairly soft activity backdrop, comments that lean gently against the 40bps of 2026 tightening priced in by markets. Rachel Reeves, meanwhile, defended her record and urged her successor to maintain fiscal credibility and stability in what was likely her final major address as Chancellor, albeit failing to move the dial for FX. Looking ahead, Andy Burnham should be confirmed as Labour leader on Friday and enter Downing Street on Monday 20th, or shortly after. With no top-tier data until next week’s jobs and CPI reports, sterling is finding support from rumours that Ed Miliband has been ruled out as the running for Chancellor. This story, we think, will continue to occupy the pound today, though our view remains that risks skew modestly lower into the transition, as further detail emerges.
CAD
The loonie was yesterday’s standout performer. broke below the 1.41 level as soft US CPI compounded ‘s rally to one-month highs, seeing the pair trading in the mid-1.40s this morning. That leaves the loonie at its strongest since June, extending momentum from Friday’s jobs beat. Attention now turns squarely to the Bank of Canada, with a rate decision and a fresh MPR due at 14:45 BST, followed by Governor Macklem’s press conference. We expect a sixth consecutive hold at 2.25%, with Macklem once again weighing an oil-driven inflation impulse against soft growth and CUSMA renegotiation uncertainty. Markets price next to nothing for today itself, but roughly 60% odds of a hike this year, which still looks too high to us. Still, a balanced tone is the most likely outcome, and should leave USDCAD tracking sideways, albeit any skew in guidance is likely to introduce volatility for the pair late in the session.
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