USD weakens broadly as trade headlines compound CPI losses - Scotiabank

The US Dollar (USD) is weak and losing ground against all of the G10 currencies while showing marginal gains vs. MXN, Scotiabank's Chief FX Strategist Shaun Osborne notes.

USD weakens broadly on trade headlines

"The performance distribution of G10 FX is varied however, with notable strength in Europe and outperformance for SEK, CHF, NOK, and EUR--all up close to 1% on the day. JPY is a mid-performer with a gain of 0.7%, while NZD and CAD are up only 0.3% and GBP and AUD are up 0.2%. The focus is on trade, with USD weakness initially sparked by comments from President Trump as he spoke of setting unilateral tariffs and notifying major trading partners in two weeks, ahead of the July 9 deadline. A reminder that the US has only successfully concluded trade negotiations with the UK and is working on bilateral deals with Japan, South Korea, the EU, and India."

"This latest round of USD weakness began on Wednesday, with the release of softer than expected US CPI that sparked an aggressive repricing of expectations for Fed easing. The latest USD-negative trade headlines have compounded a fundamentally-driven USD decline. In broader markets, the tone is one of risk aversion with a notable rollover in US equity futures as US yields extend their CPI-driven declines. The US 10Y yield is drifting back to the lower end of its 4.30-4.60% range from early May, while the German 10Y is breaking to fresh local lows under 2.50%."

"In commodities, oil prices have found further support on the back of worrisome geopolitical developments and the US' drawdown of non-essential embassy staff in Baghdad as a result of heightened security risks. Meanwhile, copper appears to be consolidating following its most recent bearish reversal and gold prices are finding renewed support on the back of both geopolitical and broadbased USD weakness. For Thursday's NA session, the release of second-tier PPI and jobless claims is not likely to be market moving, and the upcoming Fed meeting leaves markets with no speakers ahead of next Wednesday's decision."