- US Treasury yields soar
- US ISM PMI data on tap
- US dollar catches a bid and rises across the board.
USDCAD open 1.3776, overnight range 1.3728-1.3784, Aug. 29 close, 1.3749, WTI 65.92, Gold 3476.35
The Canadian dollar traded defensively and remains under pressure due to a mix of broad US dollar demand and weak Canadian data. Canada’s latest GDP report showed the economy shrinking 1.2% y/y in Q2, largely due to a 27% collapse in exports linked to US tariffs. The contraction reinforces expectations that the Bank of Canada will cut rates by 25 bps to 2.50% on September 17.
WTI rose from 63.63 to 65.93 after reports that Ukrainian drone attacks on Russian energy infrastructure removed about 1.1 million b/d of Russian crude from the market. Concerns about further strikes added additional support.
Gold surged to a record 3508.54 before easing to 3477.61 on profit-taking. The rally remains underpinned by expectations for steep US rate cuts.
The US Court of Appeals in Washington voted 7-4 that Trump had overstepped his authority by invoking the Emergency Economic Powers Act to justify broad tariffs on imports. The decision is not final as the panel gave the White House until October 14 to appeal.
Asian markets were a mixed bag at the start of the new month. Japan’s Topix rose 0.61% while Hong Kong’s Hang Seng slipped 0.47% and Australia’s ASX 200 lost 0.30%. In Europe, as of 7.35 am, trade, the German DAX is down 1.50%, the CAC 40 off 0.19%, and London’s FTSE 100 down 0.51%. S&P 500 futures shed 0.71% and the US Dollar Index sat at 98.40.
EURUSD traded in a 1.1634-1.1736 range, starting the week firm at 1.1736 before dropping to 1.1634 today. The move mirrored a surge in government bond yields, most notably France’s 30-year yield which jumped to 4.21%, the highest in 14 years. Inflation data showed headline CPI up 2.1% y/y, slightly hotter than the 2.0% forecast, while core held steady at 2.3%. The readings are unlikely to sway the ECB from cutting rates on September 11.
GBPUSD fell in a 1.3375-1.3545 range with traders hammering the currency as UK debt worries resurfaced. The slide to 1.3375 followed fears around Chancellor Rachel Reeves’ upcoming autumn budget. Those concerns sent the 30-year Gilt yield to 5.69%, the highest in 27 years and up from 5.34% just days ago.
USDJPY rallied hard in a 146.79-148.62 range, fuelled by stronger US Treasury yields. The US 10-year Treasury yield rose to 4.287% from 4.223% on Friday.
AUDUSD traded lower in a 0.6501-0.6559 range, weighed down by broad US dollar strength. Local data releases offered little direction and the pair remained defensive.
Todays US data includes US ISM Manufacturing PMI. S&P Global Manufacturing PMI data for Canada is also due.
