Forex News

Royal Bank of Canada (RBC) analysts Abbey Xu and Rachel Battaglia report that June spending by RBC Canadian cardholders remained relatively stable, with core retail sales up modestly. Discretionary goods led gains, while essential spending including gasoline also contributed. Excluding gasoline, essential spending improved, and households appear cautiously optimistic into summer despite higher energy prices and selectivity on larger discretionary purchases.

Card data show steady retail momentum

"Growth in RBC Canadian cardholder spending held relatively stable in June as consumers continued to balance higher costs for essentials while selectively spending on seasonal experiences such as sporting events."

"Our estimate of core retail sales from cardholder transactions (excluding purchases of gasoline and autos) edged up 0.5% in June on a three-month average, similar to May, suggesting spending momentum remained positive despite ongoing budget pressures from higher energy prices."

"Spending on discretionary goods led the way, posting the strongest gain among major categories on a three-month average."

"Excluding gasoline, essential spending rose 0.5% on a three-month average, a welcome improvement after earlier signs of easing."

"The breadth of spending increases across categories points to households maintaining a cautiously optimistic view heading into the summer even as they remain selective about bigger-ticket discretionary purchases."

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

• GBP/JPY heads for a third weekly gain amid broad-based Yen weakness and Pound strength.
• Japan's Finance Minister calls for greater domestic pension fund investment in Japanese financial assets.
• GBP/JPY maintains a bullish technical outlook while holding above key moving averages.

GBP/JPY trades under pressure on Friday after comments from Japan's Finance Minister Satsuki Katayama boosted the Japanese Yen (JPY). At the time of writing, the cross is trading around 217.10, down 0.30% on the day.

Katayama said the government would encourage domestic pension funds, including the Government Pension Investment Fund (GPIF), to increase their holdings of Japanese financial assets.

However, the remarks did little to reverse the Yen's broad-based weakness, leaving GBP/JPY pinned near levels last seen in 2008 and on track for a third consecutive weekly gain.

Meanwhile, the British Pound (GBP) remains the strongest-performing G10 currency in recent weeks, supported by Bank of England (BoE) interest rate hike bets and easing political uncertainty in the United Kingdom.

From a technical perspective, GBP/JPY maintains a bullish bias on the daily chart, holding above the 50-day, 100-day and 200-day Simple Moving Averages (SMAs), reinforcing the broader uptrend.

The cross also remains above the horizontal support at 216.50, while the Relative Strength Index (RSI) stands at 62.54, remaining in bullish territory. Meanwhile, the Moving Average Convergence Divergence (MACD) indicator stays in positive territory at 0.33, suggesting upside momentum remains constructive.

On the upside, immediate resistance is located at the 218.00 horizontal barrier. A sustained break above this level could pave the way for an extension of the broader uptrend.

Initial support is seen at 216.50, followed by the 50-day SMA at 214.31 and the 100-day SMA at 213.51. The 200-day SMA at 210.57 provides the next major support if a deeper corrective pullback unfolds.

Commerzbank economists Dr. Jörg Krämer and Bernd Weidensteiner argue that the AI-driven investment surge in US high-tech and IT is substantial but not yet excessive compared with past booms. They see early signs of faster US productivity, elevated equity valuations and profit expectations, and warn of potential corrections, yet conclude the AI boom and associated stock market strength are likely to persist for now.

AI boom, valuations and bubble risk

"The introduction of artificial intelligence has triggered an investment boom, particularly in the United States. The sheer scale of the resources being deployed increases the risk of a bubble. This could trigger a setback in the stock markets. We have assessed the risks and concluded that the boom is likely to continue for the time being."

"Furthermore, while stocks are expensive, they are valued lower than they were at the peak of the dot-com bubble. The price-to-earnings ratio of stocks in the S&P 500 Index, based on expected earnings over the next twelve months, currently stands at 20, compared to 25 at the beginning of 2000. We therefore do not yet view the current valuation as a cause for alarm."

"Even though we don’t expect this to happen in 2026 or 2027, an investment boom usually ends in a crisis. What might that look like? Economic history offers a blueprint in the form of the dot-com bubble in the second half of the 1990s."

"To date, a large portion of these investments has been financed from cash flow; it is only recently that companies have increasingly turned to loans. Overall corporate debt has been declining relative to GDP for years. An end to the AI boom would therefore be unlikely to trigger a banking crisis; rather, as in 2001, it would primarily result in a slump in stock prices."

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

• The Unemployment Rate in Canada dropped to 6.5% in June.
• USD/CAD remains on the defensive around the 1.4150 region on Friday.

Statistics Canada reported on Friday that the Unemployment Rate decreased to 6.5% in June, below market expectations and the previous print of 6.6%.

Additionally, the Net Change in Employment increased by 18.2K jobs, adding to the 87.8K gain in the prior month. In addition, the participation rate held steady at 65%, and wages are growing at a 3.7% annual pace, up from May’s 3.2% annual gain.

Market reaction

In the wake of the release, the Canadian Dollar (CAD) maintains a positive bias, dragging USD/CAD to the mid-1.4100s, or fresh monthly lows.

This section below was published as a preview of the Canadian labour market report at 08:00 GMT.

• The Canadian Unemployment Rate is expected to hold steady in June.
• The BoC is expected to keep its policy unchanged at its July 15 event.
• The Canadian Dollar has moved into a consolidative phase vs the US Dollar.

Markets are anticipating a fairly stable report when Statistics Canada releases its Labour Force Survey on Friday. While the Net Change in Employment is predicted to rise by 10K in June, adding to the 87.8K gain in May, the Unemployment Rate is forecast to stay at 6.6%.

Despite the report's tone, the Bank of Canada (BoC) should keep the bar pretty high for changing its policy direction. Indeed, the central bank is expected to keep its policy unchanged at its July 15 meeting, following five consecutive ‘on hold’ decisions since it last lowered rates in October 2025.

The June meeting reinforced the view that the BoC is firmly in wait-and-see mode. That said, policymakers seem willing to look through temporary shocks as long as underlying price pressures remain contained, even as they continue to monitor inflation risks, especially from higher energy prices. With the economy still showing signs of slack, the bank sees little need to change course for now. Moreover, future policy decisions will remain data-dependent, with the bar for another rate hike still appearing relatively high.

So far, market participants expect nearly 15 basis points of tightening from the BoC by year-end, down from around 35 basis points a month ago.

What can we expect from the next Canadian jobs report?

Consensus among analysts sees Canada’s Unemployment Rate at 6.6% last month. Additionally, investors forecast the economy will add around 10K jobs in June. It is worth recalling that Average Hourly Wages rose at an annualised 3.2% in May, suggesting some cooling in wage inflation.

When is the Canadian unemployment rate released, and how could it affect USD/CAD?

In Canada, traders will closely watch Friday’s jobs report, due at 12:30 GMT. A stronger print could give the Canadian Dollar (CAD) a quick lift, but don’t expect fireworks.

USD/CAD has been trading in a consolidative mood since late June, always close to its yearly peaks near 1.4250.

Pablo Piovano, Senior Analyst at FXStreet, points out that further gains in USD/CAD now appear limited by the 1.4250 zone, forcing spot to recede a tad and revisit the mid-1.4100s once again.

“In case the selling pressure gathers traction, the pair’s next relevant support is expected at the provisional 55-day SMA near 1.3900, while the loss of this region exposes a move toward the critical 200-day SMA near 1.3850, all preceding the interim 100-day SMA near 1.3820. A deeper and sustained retracement from here should see the next contention at the May floor at 1.3549 (May 1)," Piovano adds.

On the upside, Piovano sees the next hurdle at the YTD peak of 1.4248 (June 24 and 25). The break above the latter could prompt the pair to attempt a move toward the April 2025 ceiling at 1.4414 (April 1).

“Momentum favours extra gains,” he adds, noting that the Relative Strength Index (RSI) is hovering around 63 and the Average Directional Index (ADX), just over 52, suggests the underlying trend remains pretty solid.

Wells Fargo economists Tom Porcelli and Sarah House discuss upcoming BEA changes to the Personal Consumption Expenditures (PCE) Price Index that will affect data from 2021 onward. They estimate the new methodology will lower current core PCE by about 0.2 percentage points, bringing May’s rate near 3.2% versus 3.4% published, but still roughly 1 percentage point above the Federal Reserve’s (Fed) 2% target.

Method tweaks modestly lower core PCE

"We want to flag a few methodology changes that are being made to the Fed’s preferred measure of inflation, the PCE price index. The changes will be rolled out in the BEA’s annual update on September 30 and will impact data from 2021 onward."

"We expect the changes will shave only about 0.2 percentage points off the current y/y run-rate of core PCE. So the impact on actual inflation looks to be modest, but the changes are welcome just the same."

"Despite the softer spot reading, note that these changes will not consistently deliver lower inflation. Said differently, we have no reason to believe these changes will generate a structural downward bias to inflation."

"And while a two-tenths reduction is large in the scope of the typical size of revisions, it is small in the context of the Fed’s current inflation troubles."

"The new measurements won’t change the fact that inflation is still roughly a full percentage point above target."

"As a final note, the methodology changes are likely to make mapping monthly PCE estimates after the CPI and PPI are published slightly more difficult since the weightings of the new BEA composite indexes won’t be published and the “price” index for portfolio management & investment advice will no longer be observable from the monthly PPI report."

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