Bank of Canada meeting today
- Risk aversion returns with a vengeance
- US opens higher across the board
USDCAD open: 1.3938 overnight range 1.3893-1.3940, close 1.3898, WTI 90.44, Gold 4,308.79
The Canadian dollar dropped alongside its G-10 counterparts as a wave of risk aversion swept over markets. The US and Iran renewed hostilities and that sent oil prices skyrocketing, In turn, the risk that the Middle East drama will inflame global inflation sparked a widespread sell-off in global bonds which drove yields to multi-decade highs.
The Bank of Canada will meet today to announce they are leaving rates unchanged and cite uncertainty due to global risks.
Risk aversion sentiment raised its head again overnight. Bond prices dropped as oil prices surged following the latest round of US-Iran strikes and Trump threatening that Iran would be "totally wiped out as a country."
Asian equity markets finished lower, with Japan's Topix leading the decline with a 2.4% loss. Australia's ASX dropped 0.97%, while the Hang Seng finished flat.
As of 7:30 am, the German Dax is down 0.53%, the UK FTSE 100 has lost 0.39% and the French CAC 40 is 0.56% lower. S&P 500 futures are flat, the 10-year Treasury yield is 4.793%, and the DXY is 99.79.
EURUSD traded in a 1.1566-1.1597 range and remains close to the overnight low in European trading. The euro is being squeezed by renewed demand for the US dollar as risk aversion returns, while hawkish ECB rhetoric is being offset by concerns over the French budget debate.
GBPUSD traded in a 1.3481-1.3521 range and is sitting at the session low. Renewed risk aversion and the inflation threat from sharply higher crude prices following the latest escalation in the Iran conflict are weighing on sterling. With no UK economic data to provide a domestic catalyst, the direction of the greenback is calling the shots.
USDJPY traded in a 159.44-160.40 range rallying in Asia on rising oil prices then dropping into the NY open. A comment from US Treasury Secretary Bessent and hawkish remarks from BoJ officials, sent USDJPY tumbling to its lows.
AUDUSD traded in a 0.7122-0.7153 range. Upside momentum from stronger-than-expected Q2 quarterly and annual growth disappeared quickly as the focus shifted to renewed risk aversion. In New Zealand, the RBNZ lifted its benchmark rate to 2.75% from 2.5%. The move was expected.
Todays US data includes ADP employment change report (forecast 47,000 jobs vs 44,000 in July). And ISM Manufacturing PMI.
