Canada’s annual inflation rate slowed to 2.8% in June, below market expectations, supported by a sharp decline in gasoline prices following the signing of a memorandum of understanding between the United States and Iran aimed at ending the war, data showed on Monday.

However, fighting later resumed in the Middle East, prompting gasoline prices to begin rising gradually again.

Statistics Canada said the Consumer Price Index (CPI) fell 0.4% month-on-month in June.

Economists polled by Reuters had expected annual inflation of 2.9% and a monthly decline of 0.2%.

Inflation had reached 3.2% in the previous month, its highest level in 29 months, exceeding the Bank of Canada’s 3% upper target limit for the first time in more than two years.

Gasoline prices drive inflation lower

Statistics Canada said gasoline prices were the main factor behind the slowdown in inflation, after prices at the pump fell by more than 10% in June.

On an annual basis, gasoline prices rose 20.5% in June, compared with a 33.2% increase in May.

Excluding gasoline, annual inflation held steady at 2.2%, unchanged from the previous month.

Even so, transportation costs, which account for around 18% of the CPI basket, rose 6.7% year-on-year in June as fuel prices remained elevated during part of the period.

Several other components of the inflation basket also recorded increases of more than 3%, with food prices rising 3.5% and prices for recreation, education and reading increasing 3.8%.

Meanwhile, the annual increase in food purchased from stores slowed to 3.9% in June from 4.3% in May.

June nevertheless marked the 17th consecutive month in which grocery inflation exceeded the overall inflation rate.

Core inflation measures continue to ease

The data also showed a further decline in the core inflation measures closely monitored by the Bank of Canada to assess underlying price pressures.

CPI-median fell to 1.9% in June from 2.1% in May.

CPI-trim also declined to 1.8% from 2.0% in the previous month.

Following the release, the Canadian dollar weakened 0.18% against its US counterpart to C$1.4045 per US dollar, equivalent to 71.20 US cents per Canadian dollar.

Bitcoin (BTC) continued to trade below its 50-day exponential moving average (EMA) near the $65,000 level on Monday, a key technical threshold that could determine the cryptocurrency's next directional move.

Although institutional demand improved through spot Bitcoin exchange-traded funds (ETFs) last week, the escalating military confrontation between the United States and Iran continued to dampen investors' appetite for risk, keeping pressure on the world's largest cryptocurrency.

Geopolitical tensions cap Bitcoin's gains

US Central Command (CENTCOM) said on X that it had completed a ninth consecutive night of strikes against Iran, with operations concluding at 10:00 p.m. Eastern Time on July 19.

US President Donald Trump said the latest strikes were carried out in honor of American service members killed in recent days, while CENTCOM stated that the attacks were aimed at degrading Iranian military capabilities used to target commercial shipping and civilians transiting the Strait of Hormuz.

Iran responded by launching ballistic missiles and attack drones targeting US allies across the region, while Bahrain, Jordan, Kuwait, and Iraq all reported a fresh wave of attacks.

The United States also recently reimposed a naval blockade on Iranian ports and tightened restrictions on a previous license allowing the sale of Iranian oil, while Iran's Revolutionary Guard intensified surveillance of shipping traffic and efforts to restrict navigation through the Strait of Hormuz.

These developments heightened concerns that the conflict could spread further across the region, prompting investors to price in a higher geopolitical risk premium and reducing demand for higher-risk assets, including cryptocurrencies.

The renewed rise in oil prices also revived concerns over energy-driven inflation, strengthening the US dollar's appeal as a safe-haven asset and limiting Bitcoin's upside potential.

Institutional demand shows modest improvement

Data from SoSoValue showed that spot Bitcoin ETFs attracted net inflows of $75.67 million last week, marking a second consecutive week of positive inflows following a period of sustained outflows.

The continued return of institutional money suggests investors are gradually re-entering the market, a trend that could support a broader Bitcoin recovery if inflows accelerate further this week.

Simon-Peter Mesabni, Head of Business Development at XS.com, said ETF inflows had resumed but remained insufficient to trigger a decisive bullish breakout.

He added that market sentiment had improved on the back of easing US inflation and renewed ETF inflows, but Bitcoin's failure to break above the $65,000-$65,500 range suggests current buying pressure is only sufficient to limit declines rather than confirm a new upward trend.

"The $65,000-$65,500 range remains the key resistance zone in the near term. If Bitcoin manages to break above it and hold those gains, the recovery could extend toward $67,000-$68,000. However, if selling pressure persists and ETF inflows weaken again, the cryptocurrency could retest the $62,000 area, followed by the important psychological level at $60,000," Mesabni said.

He added that the market is not lacking reasons for investors to buy Bitcoin, but what it still needs is a strong and sustained catalyst, most likely in the form of significant capital inflows capable of turning the current rebound into a genuine uptrend.

A close above $65,000 could pave the way for further gains

Bitcoin was trading near $64,200, holding above an important horizontal support level at $64,004 but remaining below several major moving averages.

The 50-day EMA near $65,000, together with the 100-day moving average at $68,128 and the 200-day moving average at $74,074, represent key resistance levels that continue to keep the broader technical outlook tilted to the downside.

The Relative Strength Index (RSI) was hovering around 52, indicating broadly neutral momentum, while the Moving Average Convergence Divergence (MACD) indicator remained in positive territory but had begun losing momentum, signaling that bullish strength is fading.

If Bitcoin closes above the $65,000 level on a daily basis, it could open the door to gains toward $68,128 and then $74,074, with further resistance near $84,410.

However, if support at $64,004 is broken, the cryptocurrency could extend its decline toward $62,000, followed by the key psychological level at $60,000.

Oil prices gave up their early gains on Monday after Iran's Foreign Ministry said negotiations with the United States could resume if they are based on national interests, a statement investors interpreted as a sign that diplomatic efforts may be revived.

Crude prices had earlier climbed to their highest levels in more than a month amid concerns that oil shipments through the Strait of Hormuz would remain disrupted.

Brent crude futures fell 16 cents, or 0.18%, to $87.94 a barrel by 09:22 GMT after earlier touching $91.42, their highest level since June 11.

US West Texas Intermediate crude futures declined 68 cents, or 0.82%, to $81.81 a barrel after reaching $85.39, their highest level since June 12.

Diplomatic signals from Tehran weigh on prices

Iranian Foreign Ministry spokesman Esmaeil Baghaei said mediators had delivered new messages to Tehran in recent days but did not disclose the nature of the proposals.

Giovanni Staunovo, commodities analyst at UBS, said the comments indicating that Iran had received fresh proposals from mediators prompted oil prices to surrender all of their early gains, even as shipping activity through the Strait of Hormuz remained subdued.

Slowing tanker traffic keeps supply concerns alive

Oil prices had extended last week's sharp gains at the start of Monday's session as the escalating confrontation between the United States and Iran continued to disrupt oil shipments through the Strait of Hormuz.

The crisis intensified over the weekend after the United States carried out a ninth consecutive night of strikes against Iran, while Kuwait and Bahrain, both US allies, reported fresh Iranian attacks.

Iran's Revolutionary Guard said on Monday that two oil tankers had broken down following explosions while attempting to transit what it described as the "unsafe southern route" through the Strait of Hormuz, claiming the US military had encouraged the vessels to use that passage.

Reuters said it was unable to independently verify the claims.

ANZ analysts said in a note that the supply disruption narrative had become even more concerning, with the expected recovery in shipping traffic effectively stalling as the number of vessels transiting the Strait of Hormuz fell into single digits.

LSEG data showed that only four ships passed through the strait on Sunday, compared with eight the previous day.

The data also showed that three refined product tankers and one very large crude carrier (VLCC) entered the strait since Friday to load oil cargoes.

In a separate development, the UK Maritime Trade Operations (UKMTO) said early on Monday that a vessel had caught fire northwest of Khasab, Oman.

Shipping data also showed that Gulf producers increased crude oil and condensate exports during the first half of July to their highest levels since before the outbreak of the Iran-US conflict in late February, although oil flows through the Strait of Hormuz have begun to slow as fighting intensified.

The collapse of the ceasefire between the United States and Iran has renewed concerns over the security of energy supplies passing through the strait, which handled around 20% of global oil supplies before the conflict erupted.

Iran has also continued pressing Yemen's Houthis to shut down the Red Sea oil shipping route if the United States targets Iran's electricity infrastructure.

The US dollar traded little changed on Monday as investors remained cautious amid uncertainty surrounding the evolving conflict in the Middle East, while sterling advanced as Andy Burnham prepared to succeed Keir Starmer as the United Kingdom's prime minister.

The dollar index, which measures the US currency against a basket of six major peers, slipped 0.1% to 100.72.

Markets remained focused on the ongoing exchange of military strikes between the United States and Iran following the collapse of a temporary ceasefire reached last month. The renewed conflict has intensified tensions over control of the Strait of Hormuz, disrupting energy supplies and fueling concerns over higher global inflation.

Nick Rees, Head of Macro Research at Monex Europe, said markets appeared to have become more comfortable with the range of risks they needed to price in.

"Unless something unexpected catches investors off guard, we are unlikely to see major volatility driven by the Middle East," Rees said.

"It will remain a source of concern and keep markets cautious, but we are probably returning to the environment we saw in May, when volatility gradually eased because there was no clear conviction about the market's next direction."

Brent crude futures were little changed at $88.16 a barrel after climbing above $90 earlier in the session.

Focus shifts to Britain's next finance minister

The euro was steady at $1.1441, while sterling rose 0.13% to $1.3470 as Andy Burnham moved closer to taking office as Britain's next prime minister.

Investors are paying close attention to Burnham's choice of finance minister, given the challenging fiscal position facing the UK.

British assets received support last week after reports suggested the role could go to Shabana Mahmood, who is viewed as a centrist, rather than a candidate with a more left-leaning policy agenda.

Chris Turner, Global Head of Markets at ING, said in a note that while sterling could continue to benefit from early optimism surrounding the new government, the UK's tight fiscal position means the administration may ultimately have to raise taxes if it intends to improve public services such as social care.

In other currency markets, the US dollar fell 0.17% against the offshore Chinese yuan to 6.7663 after the People's Bank of China left its benchmark lending rates unchanged for a 14th consecutive month, in line with market expectations.

Against the Japanese yen, the dollar was little changed at ¥162.34 as trading volumes remained subdued due to the Marine Day holiday in Japan.

Markets expect Fed to keep rates unchanged

Markets continue to expect the Federal Reserve to leave interest rates unchanged at its next meeting on July 29.

Fed funds futures currently imply an 85.6% probability that rates will remain on hold, up from 61.5% a month ago, according to the CME FedWatch Tool.

Meanwhile, Cleveland Federal Reserve President Beth Hammack joined a growing number of policymakers on Friday arguing that interest rates may need to rise further to contain persistent inflation.

Her comments set the stage for what could be a closely watched policy debate at the Fed's upcoming meeting, with the possibility of differing views emerging during Kevin Warsh's second meeting as Federal Reserve Chair.