- Trump levy’s more tariffs on Canada
- Iran and US escalate hostilities again
- US dollar opens mixed to lower
USDCAD open: 1.3777, overnight range 1.3767-1.3791, close 1.3785, WTI 95.48, Gold 4,390.56
The Canadian dollar ignored the latest barrage of tariffs from Trump who is incensed that Canada continues to defy his demands. Trump levied new restrictions, banning alcohol, dairy and motorcycles. The administration also moved to shut Canadian suppliers out of the U.S. government procurement system, instructing the General Services Administration and USTR to remove Canadian-origin goods from the Multiple Award Schedules. Currency traders just shrugged.
Oil traders bought crude as the latest actions points to a more protracted US and Iran conflict. WTI oil rose from $93.77-$95.66.
Top-tier US data is thin on the ground until Friday's inflation report, the release that will frame expectations heading into the September 16 FOMC decision, where market pricing still assigns a 60% probability to a hike.
Fixed income traders are instead fixated on the outcome of today's enlarged Treasury buyback, a move Treasury Secretary Bessent frames as a deliberate attempt to defuse what he calls speculative fever gripping the long end of the curve.
Asian markets wrapped the session little changed, with the Hang Seng easing 0.17% and both Japan's Topix and Australia's ASX 200 finishing flat. Europe has been far less forgiving this morning:
As of 7:20 am the CAC 40 was off 1.81%, the DAX had shed 1.47% and the FTSE 100 was down 0.87%, while S&P 500 futures dipped 0.32%. The 10-year Treasury yield sits at 4.81%, and the DXY is at 98.77
EURUSD held a 1.1622-1.1650 range as a quiet data calendar and yet another flare-up between the US and Iran both failed to move the needle. Attention has shifted entirely to Thursday's ECB decision, where a 25 basis point hike is widely expected, and then to Friday's US CPI print, leaving the pair content to mark time until one of those catalysts’ lands.
GBPUSD was steady in a 1.3531-1.3568 band, caught between a Bank of England that sounds increasingly hawkish and a government wrestling with the fiscal arithmetic ahead of the October 28 budget. Elevated borrowing costs are colliding with a stickier inflation backdrop, squeezing the room Westminster has to fund the spending promises already on the table.
USDJPY bounced in a 152.95-154.01 range even as crude prices pushed higher, with the pair unable to shake its defensive tone. Treasury Secretary Bessent, never short on confidence, took credit for the yen's 4% rally this month, telling reporters, "I am the house now, so when we intervene with the Japanese yen, I have pretty good insight into what the Japanese, what the Bank of Japan is going to do, what Japanese policymakers are going to do." Further out, the path of least resistance still points lower given how quickly Japanese rates are rising and the growing expectation that Japanese investors will start bringing money home.
AUDUSD firmed in a 0.7212-0.7238 band, buoyed by Reserve Bank of Australia policymakers sounding progressively more hawkish. Sticky inflation has put rate hikes firmly back on the agenda, and the shift has been pronounced enough that all four of Australia's major banks now expect the RBA to raise its cash rate at the September 29 meeting.
