G10 FX Daily 1

USD Softens as Crude Oil Slides

FX Market Update—Markets are facing a relatively calm start to what is likely to be an Global FX Strategy active and potentially volatile week. Renewed de-escalation in the Gulf is the key theme for investors this morning. A pause in US/Iran attacks has prompted a sharp slump in DAILY FX UPDATE energy prices (Brent down nearly 10% from Friday) and boosted risk appetite. Stocks are Monday, July 27, 2026 positive and bond yields are down. The USD is broadly weaker against the major currencies while the NOK is down sharply and the CAD is effectively flat on the day on Analyst Team lower oil. USD losses are limited on the session but they add to the impression is that the Shaun Osborne broader dollar rally has stalled. That remains to be seen. Tensions could quickly re-emerge Chief FX Strategist in the Gulf region (there are varying reports on the status of talks and Iran has proven adept at stringing discussions along). The week ahead also brings some important US data (Durable Goods today, Q2 GDP later in the week), the FOMC decision, as well as rate Eric Theoret meetings for the BOE, BoJ and BCCh. And there are some key earnings updates from US FX Strategist tech giants which investors will perhaps hope help stabilize the sector after the tech wreck extended last week. The Philadelphia Stock Exchange Semiconductor Index dropped sharply and the NASDAQ hit a new, short-term cycle low nearly 9% off its recent peak. The FOMC decision will be the key focus for the USD, however; swaps continue to reflect market participants’ concern about the risk of a rate hike, with 8bps or so of tightening priced in the July contract. We still think the risk of a rate hike is very low and the USD is Overview likely to soften following the meeting. Chair Warsh’s review of Fed operations is ongoing • USD mostly softer as sharp fall in crude and a rate hike that could be tied directly to the Iran conflict would get his term as Fed oil lifts risk appetite. chairman off to a rocky start. Rate hawks may voice their dissent, however. Beyond the Durable Goods data at 8.30ET today, the Dallas Fed Manufacturing Activity index is out at • CAD holds little changed around 1.41, 10.30ET and the results of a USD70bn auction of 5Y bonds will be released around 13ET. external factors drive sentiment. RBA Governor Bullock speaks at 23.05ET. • EUR up modestly on broader relief rally USDCAD (1.4107) The CAD is little changed over the weekend, with lower crude prices as IFO sentiment builds on prior ZEW. weighing on sentiment to offset broader USD softness. Front-end US/Canada spreads • GBP flat w/ focus on PM Burnham’s widened somewhat last week, adding to the CAD’s generally soft undertone. There were fiscal plans & BoE Thursday (exp. hold) no major developments elsewhere over the weekend to affect CAD sentiment and there are no major data reports from Canada ahead of Friday’s May GDP report to help shape • JPY up modestly attempting a tentative trade. The CAD is once again largely reliant on external drivers for direction in the short recovery from recent multi-decade low; run. Our fair value estimate for spot is little changed at 1.4029 currently. domestic risk elevated into July 31 BoJ. USDCAD short-term technicals: Neutral/bullish—CAD technicals have softened • AUD firmer on improved risk mood; RBA somewhat. A solid USD rebound last Monday (outside range day) set the near-term floor Gov. Bullock speaks later. at 1.4000/10, with additional support at 1.4060. We expect note minor resistance at • MXN up with modest 0.3% gain on 1.4115/25 and firmer resistance at 1.4160 ahead of 1.4250. broader tone; trade data at 8am ET. EURUSD (1.1395) The EUR is entering Monday’s NA session with a modest 0.2% gain vs. the USD, a mid-performer among the G10 currencies in an environment of broad-based USD weakness. The broader tone is dominating as market participants respond to the easing in geopolitical tensions and express relief over the latest pause in the US/Iran conflict. In terms of data, Germany’s IFO business sentiment figures offered a minor surprise in expectations, mirroring last week’s unexpected improvement in the ZEW investor…