- Rising US Treasury yields continue to undermine Loonie
- Traders slightly optimistic around potential for US/Iran deal
- US dollar is bid but gives back some of its gains.
USDCAD open: 1.4145, overnight range 1.4134-1.4154, close 1.4139, WTI $93.00, Gold $4,295.35.
The Canadian sank further as the jump in US Treasury yields widened the interest-rate advantage for the greenback. Markets are now pricing three Fed rate increases by March 2027, a path the Bank of Canada could have difficulty matching given the weakness in the Canadian economy and the additional drag from Trump’s tariffs.
WTI is surrendering much of Wednesday’s rally, falling from 96.75 to 92.65 this morning. Oil prices came under pressure after reports that Washington and Tehran discussed a phased arrangement that could eventually restore traffic through the Strait of Hormuz. Iran’s Foreign Minister Araghchi confirmed that Tehran had submitted a proposal via intermediaries this week, reportedly giving Washington seven days to satisfy a series of conditions.
The most meaningful development from the Trump-Xi summit was settled before the two leaders even sat down, with Bessent confirming an extension of the existing trade truce as Xi arrived in Washington. After that, the optics seemed to take centre stage. Trump presented Xi with a bald-eagle statue, while Xi offered the loan of a pair of pandas for the Atlanta Zoo. on loan.
The US 10-year yield surged to 5.19% overnight, its highest since 2007, as expectations for Fed policy shifted sharply.
Asian equity markets finished mixed, with Japan’s Topix gaining 1.31%, while Hong Kong’s Hang Seng declined 1.01% and Australia’s ASX lost 0.43%.
As of 7:20 am, European bourses are higher. The German DAX is up 0.76%, the French CAC 40 has gained 0.22% and the UK FTSE 100 is 0.35% higher. S&P 500 futures are up 0.38%, the 10-year Treasury yield is 5.19%, DXY is 100.94 and gold is trading at $4,309.49.
EURUSD moved higher in a 1.1368-1.14010 band and is at the top of the range in New York. Hopes that the US and Iran could reach an agreement that would eventually reopen the Strait of Hormuz have improved risk sentiment. The euro continues to face resistance from French political and fiscal uncertainty.
GBPUSD inched higher, albeit somewhat reluctantly in a1.3209-1.3260 range, but remains under pressure as the outlook for US and UK monetary policy moves in opposite directions. UK markets are also scaling back expectations for as much as 100 basis points of BoE tightening over the coming year as the economy continues to operate below capacity.
USDJPY dropped in 157.55-159.00 range after Japan’s Finance Minister Katayama said Trump had raised concerns about yen weakness during his discussions with Tokyo. Katayama also said Japan would maintain close coordination with Washington on foreign exchange.
AUDUSD ticked higher in a 0.7004-0.7037 band. Markets are pricing a 25-basis-point RBA hike to 4.60% at the September 29 meeting, with the move close to fully discounted.
The Canadian economic calendar is largely empty today, leaving domestic data unlikely to provide much direction for the loonie. The US session features durable goods orders and the Michigan consumer confidence report.
