Global Bond yields rising rapidly
Equity indexes retreat
US opens mixed to firmer
USDCAD open: 1.3869 overnight range 1.3845-1.3877, close 1.3854, WTI 87.95, Gold 4,366.48
The Canadian dollar is consolidating yesterday’s gains which were mainly due to month end demand selling of USDCAD. Today’s Canadian dollar direction remains at the mercy of prevailing US risk sentiment from rising bond yields around the globe while traders await tomorrows Bank of Canada monetary policy decision.
Traders will be parsing the ISM Manufacturing PMI closely today, prices paid and employment components included, alongside July's JOLTS job openings figures, now that Fed Chair Warsh has turned hawkish at Jackson Hole. Even so, plenty of desks are still running on skeleton staff for the last week of summer, so the market reaction could be tamer than the headlines warrant.
Asian markets mostly finished lower, Japan's Topix the lone bright spot with a 0.62% gain, while the Hang Seng slid 0.93% and Australia's ASX eased 0.10%.
As of 7:30 am, the German Dax is off 1.11%, the UK FTSE 100 down 0.83% and the French CAC 40 lower by 0.38%. S&P 500 futures point to a 0.57% drop, the 10-year Treasury yield sits at 4.7872, and the DXY is at 99.60.
EURUSD slid back through a 1.1588-1.1625 range overnight, surrendering yesterday's month-end rebalancing gains as fears of stickier inflation and climbing bond yields took hold. The 10-year German bund yield touched a decade high of 3.36%, driven by supply concerns tied to Trump's Iran war and a flood of fresh debt issuance. Eurozone HICP inflation came in at 3.3% year over year for August, matching forecasts but still running well above the ECB's target.
GBPUSD held a tight, defensive 1.3529-1.3560 range through the session. Manufacturing PMI ticked up to 51.7 against a forecast of 51.5, matching July's reading, though the improvement was overshadowed by surging Gilt yields, now at 5.236%, their highest since 2008. Rising crude prices are only adding to the negative sterling pressure.
USDJPY clawed back a 159.64-160.06 range, recovering most of yesterday's month-end rebalancing losses as oil prices climbed and traders scaled back bets on US or BoJ intervention.
AUDUSD dropped into a 0.7139-0.7181 range as Fed Chair Warsh's surprise hawkish tilt blindsided traders. The market had already priced in the RBA's tightening bias, so it was the sudden repricing of US rate expectations, not anything from Australia, that forced the rapid unwind.
