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Scotiabank strategists Shaun Osborne and Eric Theoret note GBP/USD near 1.3338 is steady versus the US Dollar (USD) and outperforming on crosses despite weak construction Purchasing Managers' Index (PMI) data. The data calendar and Bank of England (BoE) speeches are limited, while rate expectations have stabilized and the curve has un-inverted. Markets see little change at the July and September meetings, pricing modest tightening by November and December, with spot seen in a 1.3300–1.3400 range.

Pound steady in tight range

"The pound is steady, entering Monday’s NA session unchanged vs. the USD while outperforming most of the G10 currencies on the crosses."

"Fundamental releases have been limited to third-tier construction PMI data, disappointing with a deeply contractionary print of 38.4 – a marginal rise from the prior month’s multi-year low of 38.2."

"This week’s data calendar is thin and BoE speaking engagements are sparse. BoE rate expectations stabilized over the past week or so, and have also un-inverted in a manner similar to the ECB’s. Markets are pricing little change for either of the next two (July 30, Sept 17) meetings, with 12bpts of tightening for November and 17bpts by December."

"Neutral – the RSI has recovered back to the neutral threshold around 50, reflecting the recovery in spot from the mid-1.31s to the upper 1.33s. We see potential near-term resistance around 1.34, a level that roughly corresponds to both the 50 and 200 day MA’s. We look to a near-term range bound between 1.3300 and 1.3400."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• EUR/USD retreats as the US Dollar starts the week on a firmer footing.
• Fed and ECB are expected to keep monetary policy restrictive for now.
• ISM Services PMI points to continued resilience in the US services sector.

The Euro (EUR) trades on the back foot against the US Dollar (USD) on Monday as investors return after the extended US Independence Day weekend. At the time of writing, EUR/USD is trading around 1.1421, down 0.12% on the day.

Trading conditions remain relatively subdued at the start of the week as markets reassess the monetary policy outlook for both the Federal Reserve (Fed) and the European Central Bank (ECB).

Lower Oil prices after last month's interim US-Iran peace deal have eased inflation concerns, reducing pressure on central banks to tighten monetary policy aggressively.

Last week's weaker-than-expected US Nonfarm Payrolls (NFP) report also lowered expectations of a near-term Fed rate hike. At the same time, softer-than-expected Eurozone inflation data reduced the likelihood of another ECB rate increase this year.

ING's Chris Turner said, "A September rate hike from the European Central Bank is now priced with less than a 50% probability, but it is too early for the ECB to sound the 'all-clear' on inflation, given the risk that core inflation could still edge higher over the coming months."

As inflation remains above both central banks' targets, monetary policy is likely to remain restrictive until there is clearer evidence that price pressures are moving sustainably back toward the 2% target.

According to the CME FedWatch Tool, traders are currently pricing in a 56% probability of a rate hike at the September meeting.

As a result, the interest rate differential continues to favor the US Dollar. The Fed's policy rate currently stands at 3.50%-3.75%, compared with the ECB's 2.25% deposit rate.

The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, is trading around 101.04, rebounding modestly from last week's low of 100.56.

On the data front, the ISM Services Purchasing Managers Index (PMI) came in at 54.0 in June, matching market expectations. While the reading eased from 54.5 in May, it marked the 23rd consecutive month of expansion.

European Central Bank (ECB) Executive Board member Isabel Schnabel said on Monday that the Eurozone is not back to a pre-war situation, even after the recent decline in Oil prices. Speaking at an event in Rome, Schnabel warned that the current inflation shock cannot be ignored by policymakers, as it is already creating indirect effects and could trigger second-round inflation pressures.

Key takeaways:

The Eurozone is not in a pre-war situation, even after the fall in oil prices.

The current shock cannot simply be looked through by the ECB.”

Federal Reserve (Fed) Governor Christopher Waller said on Monday that forward guidance can strengthen the impact of monetary policy when used properly, but warned that it can also become problematic if it limits policymakers’ flexibility. Speaking in prepared remarks for a Bank of Italy conference in Rome, Waller said forward guidance “can be a valuable tool” and has at times helped improve policymaking.

Key takeaways:

Forward guidance can be a valuable tool for monetary policy and may continue to be useful.

When effective, forward guidance can speed up the impact of monetary policy, as seen in late 2021.

Guidance can become a problem if it is too strong, too rigid, or limits flexibility under uncertain economic conditions.

Waller did not provide comments on the current economy or the Fed’s policy outlook.”

• AUD/USD holds near 0.6930 as softer Australian inflation limits demand for the Aussie.
• Australia’s TD-MI Inflation Gauge eased to 3.9% YoY in June from 4.4%.
• US S&P Global Services PMI slipped to 51.2, while ISM Services PMI matched expectations at 54.

AUD/USD trades with a cautious tone, sideways near the 0.6930 level on Monday after Australian inflation data showed further easing price pressures, while mixed United States (US) services figures kept the US Dollar (USD) broadly supported but without strong momentum.

Australia’s TD-MI Inflation Gauge slowed to 3.9% YoY in June, down from the previous 4.4%, suggesting domestic inflation pressures are losing strength. The softer reading could reduce pressure on the Reserve Bank of Australia (RBA) to maintain a more hawkish stance, weighing on the Australian Dollar (AUD).

In the United States, the S&P Global Composite Purchasing Managers Index (PMI) eased to 51.9 in June from 52.2, while the Services PMI slipped to 51.2, below expectations of 51.4 and slightly under the previous 51.3. The data pointed to slower but still positive private-sector activity, limiting aggressive USD upside.

The ISM Services PMI came in at 54, matching expectations but easing from 54.5 previously. Under the surface, the Employment Index improved sharply to 51.2 from 47.9, signaling renewed hiring strength in the services sector. However, New Orders eased to 55.1 from 57.3, while Prices Paid fell to 67.7 from 71.3, suggesting that demand and cost pressures cooled.

Short-term technical analysis:

On the 4-hour chart, AUD/USD trades at 0.6936. The pair holds a neutral to mildly constructive tone as it trades above the 20-period Simple Moving Average (SMA) at 0.6919 but remains capped below the 100-period SMA at 0.6962. A nearby pivot at 0.6935 is being probed, while the Relative Strength Index (RSI) around 57 hints at steady but not overextended bullish momentum within this short-term consolidation.

On the topside, initial resistance is seen at 0.6944, with the higher 100-period SMA at 0.6962 forming the next cap and defining a broader supply zone. On the downside, the immediate pivot support sits just below at 0.6935, followed by clustered horizontal floors at 0.6929 and 0.6924, which together underpin the pair and would need to give way to revive a deeper bearish phase.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

United Overseas Bank’s (UOB) Quek Ser Leang indicates USD/CNH has seen a slight softening in momentum but remains confined to a narrow intraday band of 6.7800–6.7930. Over the next 1–3 weeks, the bank expects range trading between 6.7750 and 6.8080 as earlier Dollar strength has faded. On a multi‑week view, a sustained recovery requires a break above the 21‑week EMA at 6.8430.

Offshore Yuan pair stays range bound

"24-HOUR VIEW: We highlighted last Friday that “there has been a slight increase in downward momentum, but this is likely to lead to USD trading in a lower range of 6.7820/6.7940 rather than a sustained decline.” We were not wrong, although USD traded within a narrower range than expected (6.7811/6.7896). There has been no further increase in downward momentum, and we continue to expect USD to trade in a range, most likely between 6.7800 and 6.7930."

"1-3 WEEKS VIEW: Last Wednesday (01 Jul, spot at 6.7920), we highlighted that the recent USD “strength has come to an end.” We also highlighted that USD “is likely to trade in a range between 6.7750 and 6.8080.” Although USD has been edging lower since then, there has been no clear increase in downward momentum. In other words, there is no change in our view"

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

BNY’s Geoff Yu notes that crowded exposure to Latin American (LatAm) bonds is unwinding as higher U.S. yields drive a domestic repricing of real-rate risks. The bank sees flows rotating toward regional equities and maintains a constructive tactical view on Latin American carry. Peru, Mexico and United States-Mexico-Canada Agreement (USMCA)-related developments are highlighted as key policy and political drivers for regional assets.

Bond outflows, equity and carry appeal

"Our longstanding concern about over-crowded exposure to Latin American bonds is beginning to materialize. End-June flows marked the first time in two months that the monthly smoothed flow score turned negative."

"Combined with stretched FX positioning, higher U.S. yields leave Latin America's yield-sensitive bond markets vulnerable to further adjustment."

"That does not imply broad capital outflows from the region. Instead, our data point to rotation rather than retrenchment, with equity flows approaching net purchase territory after a particularly weak May."

"Given the structurally lower FX hedge ratios associated with equity inflows, this rotation does not undermine our constructive tactical view on Latin American carry, where regional currencies remain our preferred expression."

"Forward look: Peru’s central bank is expected to leave rates unchanged this week, although inflation remains above target and a hawkish bias is likely until the Fed signals a clearer shift in direction."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• Silver snaps a four-day winning streak as a firmer US Dollar caps gains.
• Weaker-than-expected US jobs data eases expectations of a near-term Fed rate hike, supporting Silver's near-term outlook.
• The technical backdrop remains bearish as the metal remains capped below major moving averages.

Silver (XAG/USD) pauses a four-day winning streak on Monday as buyers take a breather following last week's 5.55% rally. A firmer US Dollar (USD) is also capping the precious metal's upside. At the time of writing, XAG/USD is trading around $61.75, easing from its intraday high of $63.28, the highest level since June 23.

The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies is trading around 101.12, up 0.22% on the day.

Despite Monday's modest pullback, Silver's near-term outlook remains supported by easing expectations of a near-term Federal Reserve (Fed) interest rate hike following weaker-than-expected US Nonfarm Payrolls (NFP) data released on Thursday.

However, the technical picture tells a different story, as Silver remains capped below both its short- and long-term moving averages.

Technical analysis:

In the daily chart, XAG/USD remains in a bearish near-term bias as price holds below the 21-day Simple Moving Average (SMA) at $63.45 and the broader 200-day SMA at $70.06, underscoring a market that is still capped by medium- and long-term trend resistance.

The Relative Strength Index (RSI) has recovered from oversold levels but remains around 42, while the Moving Average Convergence Divergence (MACD) has turned slightly positive, suggesting the rebound may be temporary within the broader downtrend.

On the topside, initial resistance emerges at the 21-day SMA near $63.45, with a more meaningful barrier at the $70 horizontal level, reinforced by the 200-day SMA at $70.06 and the 50-day SMA at $71.05 clustering just above.

Further up, the 100-day SMA around $74.81 precedes additional caps at $80 and $90. On the downside, the next notable support is the horizontal floor near $55.00, where buyers could attempt to stabilize the decline if bearish pressure resumes.

In the weekly chart, XAG/USD holds a clear bullish structural bias as price remains well above the 100-week and 200-week Simple Moving Averages (SMAs) at roughly $48.34 and $36.24, respectively, underscoring a firmly supported medium-term uptrend.

Momentum, however, looks subdued: the RSI hovers near 43, while the Moving Average Convergence Divergence (MACD) remains negative, which together hint that upside traction is waning despite the broader bullish backdrop.

On the topside, initial resistance emerges at the 50-week SMA near $64.35, with a stronger barrier higher up at the 21-week SMA around $73.93, levels that would need to be reclaimed to revive a more aggressive bullish phase.

On the downside, immediate support is seen at the 100-week SMA at $48.34, ahead of the deeper structural floor at the 200-week SMA near $36.24, where the broader bullish trend would be expected to attract buyers on a more pronounced correction.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

• The Canadian Dollar remains under pressure against the US Dollar despite support from rising Oil prices.
• Markets continue to favor the Greenback as investors expect multiple Federal Reserve rate hikes this year.
• Scotiabank says the Canadian Dollar remains weighed down by trade uncertainty, even as its undervaluation has narrowed.

USD/CAD extends its advance for a second consecutive day and trades around 1.4230 at the time of writing on Monday, up 0.20% on the day. Despite higher Oil prices, which would normally support the commodity-linked Canadian Dollar (CAD), the Loonie remains under pressure against the US Dollar (USD) as investors continue to favor the Greenback.

Shipping traffic through the Strait of Hormuz is gradually returning to normal after disruptions over the weekend, while the Organization of the Petroleum Exporting Countries and its allies (OPEC+) approved a 188K-barrel-per-day production increase for next month, led by Saudi Arabia and Russia. The decision is viewed as a sign of confidence in regional stability, although it has also revived concerns about a potential global supply surplus.

The US Dollar continues to strengthen as markets expect further monetary tightening from the Federal Reserve (Fed). According to the CME FedWatch tool, investors are pricing in a 76.9% chance of additional interest rate hikes by the end of the year. Market participants are now awaiting the release of the Fed's June meeting minutes on Wednesday for further guidance on the outlook for monetary policy.

Meanwhile, the US ISM Services Purchasing Managers Index (PMI) eased slightly to 54 in June from 54.5 previously, matching market expectations. The survey showed weaker New Orders and softer Prices Paid, while the Employment Index improved, suggesting the US services sector continues to expand at a solid pace.

According to Scotiabank, the Canadian Dollar retains a soft bias despite narrower short-term yield spreads between Canada and the United States (USD). The bank notes that confirmation of the non-renewal of the United States-Mexico-Canada Agreement (USMCA) extends trade uncertainty for Canadian exporters. Analysts also expect the Bank of Canada's (BoC) Business Outlook Survey to reflect this cautious environment. While the Canadian Dollar remains fundamentally undervalued, Scotiabank believes that this undervaluation has narrowed steadily, limiting the currency's upside potential in the near term.

Scotiabank strategists Shaun Osborne and Eric Theoret note EUR/USD around 1.1418 trading softer against the US Dollar, though mid-pack within G10. Euro area Producer Price Index (PPI) and retail sales were in line with expectations, while German factory orders surprised higher. Short-term rates have stabilized and the curve normalized, with markets expecting no European Central Bank (ECB) move on July 23 and a 50% chance of a September hike.

Euro soft as curve normalizes

"The EUR is soft, down 0.2% vs. the USD and a mid-performer among the G10 in an environment of broad-based USD strength."

"The short-term rates market has shown signs of stabilization over the past week or so, and the rise in implied yields on medium-term contracts has allowed the curve to normalize following an inversion that has been observed through most of the period since mid-March."

"The next ECB decision is scheduled for July 23 and markets are expecting no policy change while pricing in a 50% chance of a 25bpt hike for September 10."

"Bearish/neutral – the recovery in the RSI is notable, climbing from a late June sub-30 (deeply oversold) low to the low 40s with a gentle drift back toward the neutral threshold at 50. The medium-term trend remains largely neutral, with a flat range from mid-2025 roughly bound between 1.1300 and 1.2100. We see near-term support at 1.1380 and resistance above 1.1480."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)