• Gold down $6.5 to $1846
  • US 10-year yields up 0.1 bps to 3.047%
  • WTI crude oil down 85-cents to $121.26
  • S&P 500 down 2.3%
  • USD leads, AUD lags

Risk sentiment deteriorated sharply in North American trading. There wasn't a clear catalyst but Lagarde didn't do anyone any favours in her post-ECB press conference as she repeatedly highlighted fragmentation risks without offering any programs to manage soaring perihpery yields. With that, Italian and Greek yields pushed another 15 bps higher.

In the US, the bond market was better behaved in part due to a strong auction. For most of this week, it was yields driving the bus but that wasn't the case today. Still, given the rout in equities, you might hope for some downward pressure on yields.

The loonie was particularly hard hit despite the hawkish comments from Macklem. He was clear in saying 'the economy is overheating' and that the BOC will do what's needed to get inflation back to target, even if that means a recession. Perhaps it was that tone that spooked broader markets because that's when it started to go off the rails. Normally the market isn't overly tuned into the BOC but it's leading the tightening charge at the moment and that's not a message that sits well with stocks.

There's also an increasingly clear pattern where currencies aren't rewarded for hawkishness. We've seen it from the RBA this week and arguably with the ECB and BOC as well. USD/CAD jumped today even with energy prices relatively stable. AUD/USD was down 140 pips to the worst since May 26.

What's troubling for Japanese policymakers is that even in this environment the yen struggled to find a strong bid. Granted, it's trailing only USD today but USD/JPY is up 20 pips on the day and testing yesterday's 20-year high.

Cable is in focus late in the day as it breaks the London low. It's been disconnected from the risk trade lately but is showing signs of reconnecting as the political drama blows over and mixed signals from the BOE remain unsorted.

Initially the euro rallied to 1.0770 with the ECB statement putting 50 bps in Sept on the table but it ultimately fell all the way to 1.0613. Like the RBA, it's a demonstration that rate hikes matter less than growth right now.

At the same time, tomorrow is US CPI and we could simply be seeing nerves ahead of the release.

FX news wrap June 9 2022
Note that we wrapped up the day near session extremes