- Canada -US war of words intensifies
- Markets calm and awaiting Warsh speech from Jackson Hole, Friday
- US opens mixed but modestly bid.
USDCAD open: 1.3885 overnight range 1.3873-1.3891, close 1.3879, WTI 82.31, Gold 4,579.85.
The Canadian dollar churned in a narrow band as traders weighed the Fed’s rate outlook and looked ahead to Fed Chair Kevin Warsh’s speech from Jackson Hole on Friday.
Markets are hoping Warsh will shed some light on monetary policy, but why would he? He has already complained that forward guidance can restrict the Fed’s ability to respond to changing market conditions. He has also made it clear that, in his view, Fed officials talk too much.
The US-Canada trade spat has now descended into a bench-clearing brawl. Both sides insist the other wrecked negotiations with last-minute demands, and for some reason the market seems inclined to believe the Americans. Given the Trump administration’s rather flexible relationship with the truth, that seems optimistic.
Team Canada is also fighting short-handed, with Alberta Premier Danielle Smith and Saskatchewan Premier Scott Moe offering full support to the Carney government, provided they do not actually have to participate.
WTI oil caught a small bid, trading in an $80.67-$82.22 range. Oman stopped cooperating with the US to facilitate tanker movements, presumably after Trump threatened to bomb them. Trump is not helping matters. The US Justice Department is reportedly considering reviving a Civil War-era wartime court to pursue Iranian oil as a war prize.
The US dollar chopped sideways in a tight overnight band as thin summer liquidity kept conviction low. Traders largely shrugged off Wednesday's US data dump, which included personal consumption expenditures prices, GDP, and durable goods orders. None of them moved the needle on rate expectations. Attention is now fixed on Fed Chair Warsh's Jackson Hole address tomorrow.
Asian equity indexes traded on a mixed note. Japan’s Topix edged up 0.15%, while Australia's ASX 200 slid 0.98% and Hong Kong's Hang Seng lost 0.34%.
As of 7:00 am, the Germans DAX has gained 0.22%, the French CAC 40 has lost 1.14% and the UK FTSE 100 is down 0.49%. S&P 500 futures are up 0.40%, the 10-year Treasury yield sits at 4.669%, and the DXY is 99.24.
EURUSD held to a narrow 1.1639-1.1660 band as rising energy costs kept the euro on the defensive. Traders had little incentive to push the pair further after Tuesday's US inflation print came in sticky and with Jackson Hole speeches looming. Germany's GfK Consumer Climate gauge improved by 2.8 points to -26.6, though the data was ignored.
GBPUSD traded quietly in a 1.3571-1.3599 range due to an absence of domestic economic data. GBPUSD direction is being determined solely by the prevailing greenback sentiment.
USDJPY climbed in a 159.12-159.49 band because of firmer oil prices and higher` US Treasury yields. The focus now shifts to Friday's Tokyo inflation figures, though a reading near consensus should still leave a September 18 Bank of Japan hike on the table.
AUDUSD remains supported in a 0.7166-0.7188 range after this week's hotter-than-expected inflation report strengthened the case for at least one more RBA hike before year-end.
US weekly jobless claims are expected at 204,000.
