- Trump announces “Operation Freedom”- Iran says “not so fast”
- Traders fade another bout of BoJ intervention.
- The US dollar drifting high as risk sentiment sours
USDCAD open: 1.3604, overnight range 1.3579-1.3608, close 1.3591, WTI 103.15, Gold 4,574.50
The Canadian dollar drifted lower in thin overnight trade as the ongoing Middle East standoff and Trump's latest about-face on EU tariffs, weighed on risk sentiment.
Bank of Canada Governor Tiff Macklem and Deputy Governor Carolyn Rogers appear before the Standing Senate Committee on Banking today which should not impact markets.
WTI oil rallied in a 99.21-107.43 range as Trump's Operation Freedom announcement injected fresh volatility into energy markets. There are reports that Iran fired missiles at a US Navy ship as it attempted to transit the Strait. Iran says it was hit and the US says “no way.”
Trump announced Project Freedom on the weekend, a plan to deploy US Navy vessels to escort roughly 900 ships through the Strait of Hormuz. Iran says “try it.”
Traders approached the new week with caution. The BoJ is believed to have stepped into FX markets despite Japanese markets being shut for a holiday, and UK traders were also on the sidelines.
Cleveland Fed President Beth Hammack and Minneapolis Fed President Neel Kashkari flagged concern over persistently elevated inflation, which underpinned their dissent on the FOMC statement. Both supported holding rates steady but pushed to keep the door open to a move in either direction. removed. That positioning continues to support US Treasury yields.
Asian equity markets were subdued amid regional holidays. Australia's ASX 200 added 0.37% and Hong Kong's Hang Seng climbed 1.24%.
As of 8:00 am, the UK FTSE 100 is closed, the German DAX is flat, and the French CAC 40 is off 0.99%. S&P 500 futures are down 0.15%, the 10-year Treasury yield sits at 4.401%, the DXY at 98.35, and gold (XAUUSD) at 4,566.16.
EURUSD traded in a 1.1687-1.1750 range with sellers in control. Two forces dragged on the pair: the continued standoff over Strait of Hormuz access, and Trump's decision to hike tariffs on European autos to 25% from 15%.
GBPUSD posted a 1.3529-1.3607 range, pushing higher early in the Asian session before easing steadily through to the New York open. The breakdown in US-Iran talks and Tehran's stated intent to block Operation Freedom kept oil bid and risk appetite on the defensive.
USDJPY fell sharply within a 155.73-157.25 range after the BoJ repeated its intervention from Friday, then clawed back all of the losses. The exercise is proving costly in dollar terms with little to show for it. The core problem is that Prime Minister Sanae Takaichi's stimulus agenda constrains the BoJ's room to tighten, even as the Fed leans hawkish.
AUDUSD held a 0.7168-0.7221 range, staying on the back foot as the Hormuz standoff kept risk sentiment under pressure. On the diplomatic front, Japan's Prime Minister met with Australian PM Albanese to discuss closer ties and building a more resilient supply network.
Both the US and Canadian economic calendars are empty today.
