- US Treasury Secretary intervenes in Treasury market
- Trump announces “most crushing economic sanctions ever” on Iran
- US drops sharply after long-date Treasury yields plunge.
USDCAD open: 1.3766, overnight range 1.3761-1.3813, close 1.3811, WTI 86.74, Gold 4,482.20
The Canadian dollar soared yesterday, due to broad based US dollar selling pressure from Treasury Secretary Bessent’s decision to step into the long-end of the US Treasury market and double the size of Treasury buy-backs.
Trump and Trade Representative Greer are promoting the “tentative” trade agreement, while Ottawa, has been quiet.
Treasury Secretary Bessent announced he was doubling the size of the US long-bond buybacks to $4.0 billion from $2.0 billion. The US 30-year Treasury yield plunged nearly 14 bps , a successful result for his objective to slow the rise in US borrowing costs. The US dollar was collateral damage and it plummeted across the board.
The FOMC minutes released yesterday landed with a thud and gave markets nothing new to chew on.
Trump's near-daily barrage of threats against Iran continued. The latest salvo read "today, I am announcing the MOST CRUSHING ECONOMIC OPERATION EVER TAKEN AGAINST ANY COUNTRY! This will be Economic Warfare and Isolation on an unprecedented scale. ANY country that allows its financial institutions, businesses, airports, or government entities to provide any type of lifeline to Iran will itself face TREMENDOUS Economic Consequences."
Equity markets in Asia finished the session higher. Hong Kong's Hang Seng added 0.80%, Japan's Topix advanced 1.18% and Australia's ASX 200 tacked on 0.33%. Europe is a different story.
As of 7:30 am, in Europe, the German DAX off 0.36%, the French CAC-40 down 0.28% and the UK FTSE 100 has lost 0.17%. S&P 500 futures are down 0.12%, the US 10-year Treasury yield is 4.688% and the DXY is 98.71.
EURUSD rallied yesterday and added to the gains overnight, trading in a1670-1.1711 band. The single currency surged in the wake of Bessent's bond market intervention. German PPI data released this morning showed producer prices climbing at their quickest rate in over three years, an outcome that bolsters the case for an ECB rate hike.
GBPUSD climbed in a 1.3523-1.3566 range due to the lingering fall-out from the Treasury buyback announcement. Sterling continues to draw support from this week's hotter-than-expected UK inflation data.
USDJPY traded lower in a 158.03-158.73 overnight. The pair is digesting the losses that followed Bessent's bond intervention, but downside momentum is limited after Japan's July trade deficit widened to JPY 634.5 billion on surging energy import costs.
AUDUSD traded in a 0.7103-0.7133 range. The Aussie rode the wave of broad US dollar weakness higher and held on to its gains through the overnight session. Even a disappointing employment report failed to dent the upbeat mood. Australia shed 15,800 jobs against a forecast gain of 15,000, following the previous month's 80,200 increase, while the jobless rate climbed to 4.5%.
Today’s US jobless claims, forecast at 210,000 versus 209,000 last week, and the Philadelphia Fed Manufacturing Survey are likely to take a back seat to the market fallout from Bessent’s Treasury intervention.
Canadian markets have Industrial Production, the Raw Materials Price Index and the New Housing Price Index on the calendar.
