CAD Struggles Despite Softer USD; Recovery Prospects Dim

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

US Dollar        1.3720-1.3970

Euro                 1.6100-1.6350

Sterling            1.8630-1.8880

WTI Oil (opening level) $63.29

The CAD/USD is opening at 1.3855 ( 0.7217 )

CAD has failed to reflect narrower USD/CAD short-term spreads and appears to have been weighed down by, rather than benefitting from, the softer tone in the USD broadly which developed through August. From that point of view, its hard seeing the CAD staging a significant recovery at this point

Headlines

·    Trump said that he is willing to impose new tariffs on India and China on their buying of Russian crude, but only on the condition that the EU joins the US in doing so, asking the bloc to impose tariffs as high as 100%.

·    A judge blocked US President Trump from firing Fed governor Lisa Cook for now.

·    The US economy added 911K fewer jobs through March 2025 than initially reported, the largest revision since 2000, per BLS. This -0.6% adjustment contrasts with a decade average of 0.2%. Leisure, professional services, retail, and wholesale trade saw major revisions, while transportation and utilities rose slightly. The data suggests a weaker labor market.

·    Treasury Secretary Scott Bessent called on the Federal Reserve to cut rates after the mentioned revision showed weaker hiring in the year through March, saying “It turns out that we didn’t have good facts”, and that “President Trump inherited a far worse economy than reported, and he’s right to say the Fed is choking off growth with high rates.”

·    The Reuters Tankan index for Japanese manufacturers climbed to +13 in September 2025, the highest since August 2022, following a US tariff deal. Sentiment improved in autos and transport machinery despite sluggish domestic production, after a trade pact reduced US tariffs on key exports.

·    French President Macron appointed Defense Minister Sébastien Lecornu as prime minister, following François Bayrou's resignation after a no-confidence vote. Lecornu is tasked with securing National Assembly support for the budget and ensuring political stability, focusing on independence and service to the people.

·    The BoJ might consider a rate hike this year despite political factors, but will likely keep rates steady on September 19th, Bloomberg reports. Officials see progress toward the price target and the US trade deal easing growth risks, with some suggesting a potential hike by October. 

Key Points

·    Equities: US notched fresh records on Fed-cut bets; Europe was flat as M&A chatter offset French politics; Asia firmed with Hong Kong and chips higher

·    Volatility: VIX mid-teens, ETF outflows, SPX move ±24 pts, PPI focus

·    Digital Assets: BTC $111k, ETH $4.3k, mixed ETF flows, Cboe futures, Nasdaq tokenization

·    Fixed Income: US treasury yields, Italy 10-year yields traded below French 10-year yields for first time in modern era briefly yesterday.

·    Currencies: USD firms as Euro and yen trade weaker. AUD also hitting its stride

·    Commodities: Dip buyers lift gold as crude extends gains on sanctions and geopolitical risks