- Fed Chair Warsh takes center stage
- US and Canada trade tensions escalate
- US opens little changed.
USDCAD open: 1.3857 overnight range 1.3847-1.3859, close 1.3855, WTI 82.31, Gold 4,579.85.
The Canadian dollar drifted without direction in a subdued overnight session, much like the other G-10 major currencies, with markets awaiting today’s speech from Fed Chair Kevin Warsh.
The Canadian economy is expected to have eked out a modest gain in June, with GDP forecast to rise 0.2% m/m, a slight slowdown from May’s 0.3% increase. And that was before Trump’s trade war with Canada. Q2 GDP is expected to have increased 3.3% y/y, providing some cushion ahead of what could be a softer Q3.
US Michigan Consumer Confidence and Chicago PMI data are due today but the results will take a back seat to Warsh.
Global markets remained on the sidelines overnight as investors awaited potentially market-moving comments from Fed Chair Kevin Warsh today. Two Fed officials, Hammack and Collins, argued that interest rates need to remain restrictive, while Treasury officials are emphasizing that bond yields should fall as inflation subsides.
Markets are hoping Warsh will finally provide some clarity. The G-20 Finance Ministers meeting gets underway in Asheville, North Carolina, on Saturday, with Treasury Secretary Bessent at the helm. He has already bungled his attempt to manipulate long-term bond yields, while his tariff and sanctions strategy toward Iran has so far proved to be mostly bark and little bite.
Asian equity closed with Japan’s Topix rising 0.72% while Australia's ASX 200 gained 0.60% and Hong Kong's Hang Seng was flat.
As of 7:15 am, the Germans DAX has gained 0.55%, the French CAC 40 has is up 0.89% and the UK FTSE 100 has gained 0.12%. S&P 500 futures are flat, the 10-year Treasury yield is 4.688%, and the DXY is 99.17.
EURUSD drifted in a 1.1660-1.1678 range in an uneventful overnight session. Yesterday’s disappointing US consumer confidence and new home sales data, along with falling crude prices, provided some support.
GBPUSD traded in a 1.3623-1.3655 range. The pound was marginally softer overnight even as risk appetite improved elsewhere. It retained a floor from persistent expectations for a BoE rate hike before year-end.
USDJPY traded in a 159.30-159.70 band, with prices underpinned by higher-than-expected Tokyo CPI which rose 1.9% y/y vs 1.8% in July, and CPI ex-food and energy climbed to 2.0% y/y vs 1.8%. Furthermore, hawkish comments from BoJ Deputy Governor Ryozo Himino who suggested interest rate hikes were needed added to the demand.
AUDUSD rose in a 0.7190-0.7205 band on the back of rising September rate hike expectations following a surge in the RBA's preferred inflation measure earlier this week.
