Consumer Confidence Falls, USD and CAD Poised for Central Bank Moves

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

US Dollar        1.3700-1.3950

Euro                1.6130-1.6380

Sterling           1.8690-1.8940

The CAD/USD is opening at 1.3822 ( 0.7235 )

USD is trading moderately lower. US consumer confidence data released on Friday added bearish pressure on the USD, but investors are wary of shorting the Greenback ahead of Wednesday’s Fed decision. The Consumer Sentiment Index revealed that US consumers have grown more cautious amid the higher prices, adding to evidence that the impact of Trump’s tariffs is starting to pinch the US economy. September’s Consumer Confidence Index fell to 55.4, its weakest reading since May, from 58.2 in August, and well below the 58.0 reading forecasted by market analysts. Beyond that, inflation expectations for the year remained steady while the long-term inflation outlook rose for the second straight month. These figures add pressure on the Fed to ease interest rates on Wednesday and strengthen the case of a dovish turn at the bank’s forward guidance. Such an outcome would have negative consequences for the US Dollar. The Canadian Dollar, however, is failing to take a significant advantage from US Dollar weakness, as the Bank of Canada is also expected to cut rates by 25 basis points on Wednesday. Before that, the Canadian CPI prices are expected to show further moderation in August, paving the path for BoC’s rate cut.

Headlines

• The FT reports a “desperate supply squeeze” is developing for the rare earth metal germanium, which is critical for a number of military applications like thermal imaging for infrared imaging. China dominates the global supply chain for the metal and
• The US preliminary University of Michigan Sentiment survey released Friday showed sentiment falling to 55.4 in September 2025 from 58.2 in August, below the expected 58. This second monthly drop is the lowest since May, impacting mainly lower- and middle-income households. Although durable goods buying improved, concerns over business conditions, jobs, and inflation grew. Personal finance views dropped 8%, with 60% citing tariffs as a major issue.
• US and Chinese officials began trade talks in Madrid, discussing strained relations, TikTok's divestiture deadline, and potential tariffs on Chinese goods over Beijing's russian oil purchases. US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer met with Chinese Vice Premier He Lifeng and negotiator Li Chenggang.
• Fitch Ratings downgraded France's credit rating to A+ from AA-, citing political turmoil and rising debt. This follows Prime Minister François Bayrou's resignation after losing a confidence vote on an austerity budget. Sébastien Lecornu was appointed to form a new government.
• The UK economy stalled in July 2025 after June's 0.4% growth, as predicted. Services edged up 0.1%, while construction rose 0.2%, but production fell 0.9% with manufacturing down 1.3%. Over three months to July, GDP rose 0.2%, weighed by a production decline. Annual GDP growth was stable at 1.4%, slightly below the 1.5% forecast.
• China's economic activity slowed more than expected in August, with industrial output and consumption having their worst month yet this year. Retail sales grew 3.4% on year in August, down from 3.7% in the previous month, and expansion in fixed-asset investment decelerated sharply to 0.5%. A notable slowdown in third-quarter GDP growth may jeopardise the government's 5% growth target, raising hopes for more policy stimulus.

Key Points

• Equities: US flat with Nasdaq at a record on rate-cut bets; Europe fractionally lower on pharma drag and France risk; Asia firmer with Hong Kong at a 4-year high and Japan at a record
• Volatility: VIX flat, Fed week, skew calm, SPX ±73pts
• Digital Assets: BTC stable, ETH outflows, ETF gains, alt season index 67%
• Currencies: USD mixed, JPY firms overnight ahead of FOMC, BoJ later this week
• Commodities: Broad gains seen ahead of FOMC decision
• Fixed Income: European yields rose Friday even before Fitch downgrade of French debt