The Bank of Canada left the target for its overnight rate unchanged at 2.25% for a sixth consecutive decision in July 2026, in light with expectations. The Governing Council noted that Canada's economy has shows signs of improvement in the last months despite being dented by the immediate impact of soaring energy prices from the Middle East conflict. The Council added that it is unlikely that economic growth will be remain at its elevated pace for long, but noted that the sources of expansion are broadening. New projections have Canada's GDP growth slowing to 2.75% this year, before rebounding to 3.25% next year. In the meantime, inflation is also due to slow as the pressure from the energy shock eases, although geopolitical uncertainty holds the unpredictable outlook, warranting no change in monetary conditions. The BoC's base case sees CPI inflation to stay above the 3% threshold in June and ease in the coming months, before converging to 2% by next year.

The pound climbed to $1.348, its highest level since late May, and reached its strongest level against the euro in more than a year, driven by expectations that Andy Burnham, widely expected to be confirmed as the UK's next prime minister on Monday, will appoint a fiscally conservative finance minister. With Burnham's confirmation largely anticipated, investor attention has shifted to his choice for the Treasury, particularly given the UK's fragile public finances. Reports suggesting that Home Secretary Shabana Mahmood is the leading candidate to head the finance ministry helped reassure markets, easing concerns that Burnham could instead appoint Ed Miliband, who is viewed as favoring a more expansionary fiscal stance. Meanwhile, rising Middle East tensions have lifted oil prices to one-month highs, reinforcing expectations of further Bank of England rate hikes. Markets now fully price in a November increase, with another expected by March 2027.

Crude oil pared early gains to trade below $79 a barrel on Wednesday, but escalating tensions in the Middle East continued to fuel supply concerns. The move followed another round of US strikes against Iran and the reinstatement of a naval blockade targeting Iranian ports near the Strait of Hormuz. US forces struck dozens of military assets along Iran's coastline and near the strategic waterway during a seven-hour operation aimed at weakening Tehran's ability to disrupt shipping through the Strait of Hormuz. President Trump also pledged to intensify military operations until Iran halts attacks on vessels in the Strait and agrees to reopen the waterway. Meanwhile, on Tuesday, President Trump abandoned plans to impose a 20% fee on cargo transiting Hormuz, arguing that any forgone revenue would be more than offset by future investments from Gulf nations in the US. On the data front, EIA data showed that US crude inventories fell by 1.7 million barrels last week.

US stocks were mostly higher on Wednesday amid signs that the war in Iran has not been as inflationary as feared. The S&P 500 gained 0.4% and the Dow gained 250 points. Headline and core producer prices rose less than expected in June, aligning with the soft CPI report from yesterday and further trimming risks that the Fed could raise interest rates in their upcoming meeting. The data offset pressure from higher energy prices on further escalation to strikes between the US and Iran. Yields rose further, but strong earnings reports underpinned broad gains for equities. Morgan Stanley added 1.6% after posting optimistic results, joining JPMorgan and Goldman Sachs in their strong reports. Blackrock and other asset managers surged over 5% after their results, and J&J was flat after earnings. In turn, hyperscalers were sharply higher with Microsoft, Amazon, and Alphabet adding over 3% after strong results from ASML. On the other hand, the Nasdaq 100 fell 1% as memory producers plunged.

The New York Fed’s Empire State Manufacturing Index jumped 10 points to 15.6 in July 2026, signaling a significant pickup in business activity across New York State. New orders and shipments saw strong growth, while unfilled orders rose and delivery times lengthened further. Supply availability continued to deteriorate. Employment increased at a solid pace, and the average workweek edged higher. Input and selling price increases remained elevated but slowed slightly. Firms maintained an optimistic outlook for the coming months.

The average US 30-year fixed mortgage rate for loans of up to $806,500 rose to 6.65% in the week ending July 10, 2026, from 6.58% a week earlier, matching the nine-month high reached in May, according to the Mortgage Bankers Association. The increase reflects a recent rise in US Treasury yields, fueled by persistent inflation concerns and growing expectations that the Federal Reserve could raise interest rates later this year, even as the labor market continues to show signs of gradual cooling. Higher borrowing costs weighed on mortgage demand, with total applications falling 2.7%, a second consecutive weekly decline. Purchase applications dropped 7.3%, signaling softer homebuying activity, while refinancing applications increased 3.5% as some homeowners took advantage of recent market movements.