USD
The dollar found a floor on Thursday after two days of CPI-induced losses, hovering near one-month lows, with the consolidating just above 100.7 this morning and still on course for a weekly decline. June retail sales rose 0.2% MoM as expected yesterday, albeit with the ex-autos measure contracting 0.2%. Meanwhile, jobless claims undershot forecasts and an upbeat Philly Fed rounded out the data slate, enough to stall, but not reverse, this week’s dovish repricing, seeing July 29th hike odds remain marginal, with September near a coin flip. Middle East hostilities continue to cap dollar downside, however, with near $85 and on track for a 12% weekly surge, the largest since April. Today brings June industrial production at 14:15 BST and July’s preliminary Michigan sentiment at 15:00 BST, the final inputs before the Fed blackout. We still see dollar risks skewed lower as hike bets unwind, but stay cautious of chasing weakness into a headline-prone weekend.
EUR
The euro traded quietly on Thursday, easing back to the mid-1.14s against a steadier dollar, where it sits this morning. With the Governing Council also in its quiet period ahead of next Thursday’s decision, external forces dominate, and these remain unhelpful. A terms-of-trade squeeze is deepening with Brent approaching $85, and EU gas storage at just 53% ahead of the heating season. Today’s highlight is the final June HICP release at 10:00 BST, where the flash showed headline inflation cooling to 2.8% from May’s 3.2%. Confirmation should leave intact the roughly 45bps of further ECB tightening priced this year; we continue to think next week comes too early for another move, though a sustained Strait of Hormuz closure keeps a September hike firmly on the table.
GBP
Thursday saw fading around half a percent to just below 1.35, partially unwinding Wednesday’s rally, when reports that Shabana Mahmood, rather than Ed Miliband, would take the Treasury helped lift the pound to a one-year high against the euro. Burnham himself supplied Thursday’s catalyst, declining to rule out tax rises, suggesting people may pay “a little bit more”, and refocusing minds on a tax-raising autumn Budget. Today, Burnham will be confirmed as Labour leader before taking office as PM on Monday. We suspect a light data calendar will help keep attention on the new government’s fiscal challenges – a dynamic likely to prove a sterling negative if yesterday’s price action is anything to go by. As such, we retain a modest downside bias into the handover, though a market-friendly cabinet on Monday would soften the blow.
CAD
The loonie consolidated on Thursday, with holding just above 1.40 this morning after sliding lower mid-week. Wednesday’s BoC decision continues to frame trading: as we noted in our reaction, the sixth consecutive hold at 2.25% matched our call, with a mildly constructive tone as the Bank judged uncertainties to have eased, even as the fresh MPR cut 2026 growth to 0.7% and Governor Macklem signalled he would look through oil-driven swings in headline inflation. Crude is doing the near-term work for CAD: WTI trades near $80, with the reinstated US naval blockade outside the Strait of Hormuz and nightly strikes on Iran choking Gulf supply, though USMCA uncertainty offsets, after Washington indicated it would not renew the agreement in its current form. Today’s domestic calendar is effectively bare ahead of next week’s June CPI report, leaving USDCAD to trade off US data, crude, and Middle East headlines.
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