- Sliding Treasury yields weigh on US dollar
- Canada inflation expected to have heated up in August
- US dollar trading negatively.
USDCAD open 1.3766 overnight range 1.3762-1.3783, close, 1.3780, WTI 63.18, Gold 3698.31
The Canadian dollar rally picked up speed yesterday after weaker than expected NY Empire State Manufacturing data and Fed news fueled US dollar selling pressure. The NY Empire State Manufacturing Survey showed that businesses conditions were far weaker than expected. Then news broke that Trumps former Chair of the Council of Economic Advisors Stephen Miran, was confirmed as a Fed Governor and will vote at the FOMC meeting that starts today.
Canadian inflation is expected to have risen to 2.7% y/y from 2.6% in July while Core CPI ticks up to 2.7% from 2.6%. The results won’t stop the BoC from cutting rates by 25 bps tomorrow, but they may encourage a more hawkish outlook from policymakers.
Today’s US data releases are unlikely to shift expectations. Retail sales are projected to rise 0.2% in August compared to 0.5% in July, while capacity utilization, industrial production, and inventories are expected to show little change. Regardless of the results, markets remain convinced that the Fed will ease policy.
Asian markets ended mixed overnight. Japan’s Topix gained 0.25% and Australia’s ASX 200 rose 0.28%, while Hong Kong’s Hang Seng closed flat.
In Europe as of 7:30 am, sentiment is cautious. The German DAX is down 0.56%, the UK FTSE 100 has lost 0.20%, and the French CAC 40 is unchanged. US futures are modestly positive with the S&P 500 up 0.16%. The dollar index has slipped to 97.05 and the US 10-year yield is at 4.035%.
EURUSD climbed to the top of its 1.1757–1.1818 overnight range in early New York trade. The move was supported by weak NY Empire State data and speculation that Miran’s Fed confirmation could accelerate the pace of rate cuts. Traders brushed aside political tension in France and weak German survey data. The uptrend from August 1 remains intact as long as prices hold above 1.1680.
GBPUSD followed the euro higher, rallying to 1.3646 from 1.3597. The move was underpinned by broad dollar selling and reinforced by UK labor data, which showed cooling but not enough to push the Bank of England into an immediate rate cut. Technicals stay bullish above 1.3560 with room to extend through 1.3680 toward 1.3900.
USDJPY weakened as the pair traded in a 146.70–145.54 band overnight. Diverging Fed and BoJ policies remain the driver, with Japan’s election keeping the BoJ on hold while the Fed is expected to trim rates by 25 basis points tomorrow. Lower US tariffs on Japanese exports, including autos, also take effect today.
AUDUSD edged higher in a narrow 0.6660–0.6676 range, buoyed by softer US yields and broad dollar weakness. RBA Assistant Governor Sarah Hunter noted that risks to the domestic outlook are balanced, suggesting no change to rates at the September 30 policy meeting.
