Tariff Impact Modest, But Oil Weakness Weighs on Loonie

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.3660-1.3910

Euro                 1.5990-1.6240

Sterling            1.8590-1.8840

WTI Oil (opening level) $62.93

The CAD/USD is opening at 1.3782 ( 0.7256 )

BoC policymakers said in deliberations that the impact of US tariffs on inflation “appeared to be modest so far,” but those effects were just beginning to show up in the data. However, the BoC will get a fresh look at inflation figures for July and August ahead of its September 17 interest rate decision.

A decline in crude oil prices might weigh on the CAD and help limit its strength. It’s worth noting that Canada is the largest oil exporter to the US, and lower crude oil prices tend to have a negative impact on the CAD value.

Headlines

·    Trump assured European leaders late yesterday that there would be “very severe consequences” if Putin refuses to end Ukraine war as we hopes to get putin to agree to a ceasefire in the Ukraine war at a meeting with the russian leader in Alaska tomorrow.

·    US Treasury Secretary Scott Bessent suggests the Fed’s rate should be 1.5 percentage points lower and said that the Fed likely would have cut had they known of the revised payrolls data at the July meeting. He said there are 10 or 11 candidates to succeed Chair Jerome Powell in May.

·    US Treasury Secretary Bessent said that he expected Japan to raise its policy rate to counter rising inflation, a move that prompted a sharply stronger Japanese yen overnight.

·    US Treasury Secretary Bessent announced that U.S. trade officials will reconvene with Chinese counterparts within two to three months to discuss economic relations. This follows a 90-day extension of their tariff truce, preventing significant duties on bilateral goods.

·    Chinese officials announced loan interest subsidies for personal and service sector loans to enhance consumption, a crucial economic driver. This initiative aims to stimulate spending and promote economic growth.

Key Points

• Equities: US extends gains; Europe at 2-week highs; UK GDP in focus; mixed Asia

·    Volatility: VIX steady near lows; SPX daily move ±24 pts

·    Digital assets: Bitcoin >$124k; Ether near record; ETF inflows drive gains

·    Fixed Income: US and European yields reverse lower while Japan’s yields rise

·    Currencies: JPY leaps higher on Treasury Secretary comments on BoJ hikes

·    Commodities: Crude steadies ahead of Putin-Trump talks, silver outshines gold