Euro Rallies to Fresh Highs, Markets Eye Fed Move

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

US Dollar        1.3630-1.3880

Euro                 1.6170-1.6420

Sterling            1.8630-1.8880

WTI Oil (opening level) $64.34

The CAD/USD is opening at 1.3759 ( 0.7268 )

The US dollar weakened sharply yesterday, especially versus a resurgent EUR, with EURUSD posting a new cycle and multi-year high above the former high of 1.1829 and all the way to 1.1878 before easing back ahead of today’s FOMC meeting.

Headlines

·    Canada's annual core inflation, excluding eight volatile items like food, energy, and mortgage interest costs, remained at 2.6%, the same as in July and slightly under the 2.7% market expectation. Month-on-month, core consumer prices were unchanged, after a 0.1% rise in July.

·    The FOMC is projected to lower borrowing costs today for the first time in 2025, with a quarter-point reduction being fully priced in. But a cooling labor market has seen traders increasing options wagers that the FOMC will deliver at least one half-point cut at one of the two remaining policy meetings this year.

·    US retail sales rose 0.6% in August 2025, beating the forecast of 0.2%. Increases were notable in non-store retailers (2%), clothing (1%), and sporting goods (0.8%). Excluding major categories, sales jumped 0.7%, outperforming expectations of 0.4%. Declines occurred in miscellaneous retailers (-1.1%).

·    Oracle, Silver Lake, and Andreessen Horowitz will become TikTok's new majority owners in the US. Oracle, co-founded by Larry Ellison, is TikTok's cloud provider. Silver Lake and Andreessen Horowitz are investment firms led by billionaires, including Trump adviser Marc Andreessen.

·    China revealed measures to boost services consumption, including opening internet and culture sectors and hosting international sports events. Nine agencies aim to attract foreign investment in high-end medical care, support construction of cultural facilities with central and local funds and use monetary policies to expand credit for services.

·    US industrial production rose 0.1%, surpassing expectations of a 0.1% decrease after July's revised 0.4% fall. Manufacturing output increased 0.2%, beating forecasts of a 0.2% drop. Mining output grew 0.9%, while utilities fell 2%. Capacity utilization remained at 77.4%, 2.2 points below its long-run average.

·    Trump in UK on state visit

Key Points

·    Equities: US slipped ahead of the Fed; Europe fell on bank and insurer weakness; Asia mixed with Japan at records and Hong Kong flat

·    Volatility: Fed day, VIX mid-teens, SPX ±45pts, event risk

·    Digital Assets: BTC steady $117k, IBIT inflows, ETHA outflows, alts mixed

·    Fixed Income: US short treasury yields price more Fed easing

·    Currencies: USD weak, especially against resurgent EUR as EURUSD posts new high.

·    Commodities: Silver trims rally ahead of FOMC; gold steady

·    Macro events: FOMC Rate Decision