- Middle East tensions escalate
- US inflation expected to tick lower
- US dollar opens with modest gains.
USDCAD open: 1.3936, overnight range 1.3918-1.3935. close 1.3925, WTI 83.07, Gold 4,415.70
The Canadian locked in a consolidation phase after extending its gains following Friday’s much stronger Canadian employment report and disappointing US payrolls data. The soft US numbers reduced expectations for a September Fed rate hike. Furthermore, narrowing CAD/US interest rate spread provided another reason for traders to sell the pair.
WTI fell from an Asian session high of 84.34 to 82.15 before recovering to 83.11 in New York. Prices remain supported by reports of shipping being attacked in the Red Sea, and US forces firing on a container vessels bound for Iran in the Sea of Oman. The Strait of Hormuz remains all but closed. Yesterday’s API report showed US crude inventories increasing by 9.07 million barrels.
FX markets opened in New York in a mild risk-off mood as the US dollar index edged higher on renewed hostilities in the Middle East.
Traders also stayed cautious ahead of today's US inflation release. Core CPI for July is forecast to climb 0.2% month over month, up from zero in June, though the annual pace is seen easing to 2.5% from 2.6%.
Asian equities were mixed overnight. Japan's Topix added 0.94%, Australia's ASX 200 slipped 0.45%, and Hong Kong's Hang Seng dropped 0.83%.
As of 7:20 am, Germany's DAX was up 0.49% while the UK FTSE 100 and French CAC 40 were flat. S&P 500 futures are up 0.27%, the US 10-year Treasury yield is 4.662%, and the US dollar index is 99.86.
EURUSD barely budged in a 1.1532-1.1550 band. German Harmonized CPI was in line with expectations at 0.9% month over month and 2.8% year over year and the news was ignored. However, gains remain capped due to rising oil prices.
GBPUSD is steady in a 1.3502-1.3529 range with prices just below July's high. Traders are treading carefully ahead of today’s US CPI print, and Thursday’s UK GDP, industrial production and manufacturing production data.
USDJPY chopped in a 158.61-159.46 range and slid to its session low just ahead of the New York open. Bloomberg reported friction between US Treasury Secretary Scott Bessent and Japanese Prime Minister Sanae Takaichi over rate policy, with Bessent pressing Tokyo to hike.
Takaichi is resisting a rapid or aggressive tightening path.
AUDUSD traded in a 0.7054-0.7072 band and is close to its best levels of the day. The currency pair is still supported by this week's hawkish RBA hold and policymakers' warning that further inflation upside would bring rate hikes back into play.
