Tanker flows through the Strait of Hormuz picked up sharply in early July. Energy prices sank but long-term yields remain higher, shifting monetary policy back to the market's spotlight. The Federal Reserve will release minutes from its June meeting to unveil insights on a divided FOMC. On the data front, the US will release the ISM Services PMI, existing home sales, and its full trade balance. The ECB will also release monetary policy accounts. Germany and Italy will publish industrial output data, while Germany will join France in posting trade flows. A busy week of economic data in Japan will be headlined by consumer spending, machine tool orders, producer prices, and the current account at a time of pressure on the yen and JGBs. China will unveil its inflation rate. On policy decisions, the RBNZ will determine its interest rate. Elsewhere, OPEC will meet and define output levels on improved trade routes.

Week Ahead - Jul 6th

The Canadian dollar traded near 1.42 per USD in July, remaining close to a one-year low as pressure from lower oil prices outweighed a softer the US dollar following their weak jobs report. The Canadian currency continued to face headwinds from lower global oil prices, which have reduced Canada's terms-of-trade advantage and reinforced expectations that the BoC will maintain a dovish policy stance if disinflation continues. Domestic data provided only limited support, pointing to modest manufacturing growth and a labor market that remains soft but is showing signs of stabilizing. These conditions are expected to keep the BoC on hold. Meanwhile, uncertainty surrounding negotiations to revise the USMCA continued to weigh on the economic outlook and reduced prospects for future rate hikes. The US dollar, however, remained under pressure at the turn of the month as weak US jobs data lowered expectations of a near-term Fed rate hike.

Canadian Dollar Remains Near One-Year Low

The Brazilian real rose to 5.17 per USD from the three-month low of 5.22 on July 2nd as weak labor data from the US threatened to stretch the rate differential between the Fed and the BCB. The interest rate differential remains supportive for the real, with Brazil's benchmark Selic rate at 14.25% compared with the US policy range of 3.50%-3.75%. The wide yield gap continued to attract foreign inflows and support the Brazilian currency. Domestic gross public debt rose above forecasts in May, while primary deficit was wider than expected. The deterioration in fiscal accounts reinforced expectations of higher-for-longer borrowing costs and persistent upward pressure on interest rates. In addition, Brazil’s annual inflation rose past 4.8% in the first half of June, above the central bank's upper target band of 4.5%

Brazilian Real Strengthens as Fed Rate Hike Bets Ease

The FTSE MIB Index gained 391 points or 0.75 percent on Friday to close at 52819 points. Gains were led by Amplifon (4.71%), Saipem (3.69%) and Lottomatica (3.67%). Biggest losers were Stellantis N.V. (-3.60%), Brunello Cucinelli (-0.70%) and Azimut Holding (-0.52%).

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Week Ahead - Jul 6th

Canadian Dollar Remains Near One-Year Low

Brazilian Real Strengthens as Fed Rate Hike Bets Ease

The FTSE MIB Index Closes 0.75% Higher