Forexlive Americas FX news wrap: Trump cancels trade talks with Canada ...Middle East

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Forexlive Americas FX news wrap: Trump cancels trade talks with Canada
Trump cancels trade talks with CanadaCarney says he has not spoken with Trump todayUS May PCE core +2.7% y/y vs +2.6% expectedCanada GDP for April -0.1% vs +0.0% expectedUS June final UMich consumer sentiment 60.7 vs 60.5 expectedTrump: I've ended sanctions relief for Iran because the Ayatollah didn't say thank-youTrump: In the process of making trade dealsUS oil drilling rigs fall for the ninth straight weekBessent: I'm not sure why the US dollar moves would bother meFed's Kashkari: I continue to expect two rate cuts in 2025US Bessent: I think we could have trade wrapped up by Labor DayUS Bessent: Confident that magnets will flow in China-US deal

Markets:

US 10-year yields up 2 bps to 4.27%WTI crude oil down 17-cens to $65.07Gold down $54 to $3273S&P 500 closes up 0.5% to recordEUR leads, CAD lags

The day started with the PCE data and it painted a tough picture for policymakers as core inflation ran hot but spending cooled in something of a stagflationary impulse. That led to some early US dollar selling and the euro hit a fresh three-year high at 1.1750. That move didn't last long as selling pulled it back to 1.1715 at the European close. I suspect there might have been some flow-driven USD buying ahead of quarter end as it was a broader move.

    The next big market move came late in the day when Trump said he was cutting off trade negotiations with Canada in a sign that Tariff Man is back. That led to a 70-pip rise in USD/CAD and we saw the US dollar rise broadly as risk assets came under pressure. The S&P 500 gave up a 40 point gain in the aftermath.

    But the TACO trade kicked in late with the market concluding it's all a negotiating tactic and the S&P 500 closing up 32 points. USD/CAD gave back nearly all the gain as well and the dollar is doing the same on some other fronts.

    Trump's issue with Canada is the long-planned digital services tax that will go into effect on Monday. That short timeline could lead to weekend risks and a potential short turnaround on a deal.

    Have a great weekend.

    This article was written by Adam Button at www.forexlive.com.

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