- US Treasury yields consolidating recent losses.
- Oil prices rise on increased US/Iran tensions
- US dollar trading defensively
USDCAD open (6:00 am): 1.4003, overnight range 1.3997-1.4019, close 1.4009, WTI $101.18, Gold $4,024.21.
The Canadian dollar is attempting to make a decisive break below the1.4000 area but it is struggling even though the US dollar is trading defensively against the rest of the G-10 majors. The move is powered by CAD/US interest rate spreads narrowing after US Treasury yields plunged sharply.
WTI pushed higher into the weekend, climbing from $98.85 to $101.30 into the NY open. Part of the lift came from Trump’s latest musing about joining Israel in an attack on Iran once the midterms are out of the way. The reasoning behind the delay appears to be a bet that American voters will be too forgetful to recall how much they loathe the Iran war by the time they head to the ballot box.
Prices drew further support from reports that the Houthis have resumed attacks on Saudi Arabia and from IRGC claims of strikes on Gulf shipping. For good measure, a pipeline shutdown in Libya shaved a little more off supply.
Today global markets are digesting the fall-out from the Ai/Tech stock rout in NY, yesterday. The Nasdaq slumped 2.6% and the S&P 500 gave up 1.2%, its ugliest session since July, as investors worked out that building data centres with 5% money is a very different business from building them with free money. Meta tumbled 7% after the market gagged on news that capex would climb by roughly $145 billion, swelling total future AI-related obligations to a gargantuan $825 billion.
Canadian August retail sales are forecast to rebound 1.3% after slipping 0.7% in July.
Asian equities couldn’t settle on a direction. Japan’s Topix slipped 0.78%, Hong Kong’s Hang Seng climbed 0.69% and Australia’s ASX 200 went precisely nowhere.
As of 7:40 am, the German DAX is down 0.68%, the UK FTSE 100 has lost 0.47% and the French CAC-40 has lost 0.55%. S&P 500 futures are 0.27% lower, the 10-year Treasury yield sits at 4.994%, and the U.S dollar index (DXY) is at 101.81.
EURUSD bounced around in a 1.1185-1.1227 range after German and Eurozone flash PMIs undershot forecasts. France is supplying other issues, with fiscal theatrics and street unrest on full display and Moody’s set to pass judgment on French debt after the close. ECB’s Fabio Panetta played down the climb in yields as a headwind for growth rather than a crisis, and markets continue to price close to three 25 bp hikes by the end of 2027.
GBPUSD traded defensively in a 1.3371-1.3408 band as it digested this week’s gain. September retail sales dropped 0.4%, worse than the -0.1% forecast and a sharp reversal from August’s 0.7% gain, while GfK consumer confidence sank to -24 against expectations of -15, giving sellers little reason to back off.
USDJPY slid to 156.08 in Asia, the floor of a 156.08-157.16 range and a one-month low, as jitters over US tech stocks sent investors scurrying for the safety of the yen. Buyers found their nerve again on firmer oil prices and a September national CPI print that rose to 2.1% from 1.9%, with the ex-fresh food and energy gauge at 2.4% versus 2.3% expected.
AUDUSD traded in a 0.7005-0.7025 range, guarding this week’s gains even as flash PMIs turned decidedly ugly. The composite index dropped to 47.7 from 51.3, its first contraction since May, while services sank to 47.8 from 51.9. None of that dented bets on a 25 bp RBA hike at the next meeting, which kept a floor under prices.
Canadian retail sales for August are expected to rise by 1.3% after July's 0.7% drop.
US Michigan October Consumer Sentiment is expected unchanged at 46.3.
