Shutdown Risks Rise After White House Talks

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

US Dollar        1.3800-1.4050

Euro                 1.6220-1.6470

Sterling            1.8580-1.8830

WTI Oil (opening level) $63.04

The CAD/USD is opening at 1.3925 ( 0.7181 )

Canadian banks are closed today. I expect a steady range trade between 1.3910 and 1.3935. Very little reason for it to move today. Though the technical analysis seems to suggest that 1.4010 is on the horizon in the next few days.

Headlines

·    Australia’s Reserve Bank kept its policy rate unchanged at 3.60% as widely expected and said that inflation is likely to come in higher than expected previously, throwing into doubt the likelihood of a rate reduction at the November meeting. Australian yields and the Australian dollar rose in the wake of the statement release with Governor Bullock out speaking this morning.

·    In August 2025, U.S. pending home sales surged 4% from the previous month, erasing back-to-back declines, with increases in the West (5%), Midwest (8.7%), South (3.1%), and Northeast (1.1%). NAR Chief Economist Lawrence Yun attributed the rebound to lower mortgage rates boosting buyer activity. Sales also rose 3.8% compared to the previous year.

·    BoJ board members discussed the potential for raising interest rates soon, with one suggesting it might be a suitable time.

·    Japan's retail sales in August 2025 fell by 1.1% year-on-year, marking the first decline since February 2022 and missing the expected 1% increase. Declines were seen in automobiles, non-store retailers, fuel, and department stores, while other categories like machinery, pharmaceuticals, and textiles saw gains. Monthly sales also dropped by 1.1%.

·    After a meeting between US President Trump and congressional leaders from both parties at the White House, Vice President JD Vance said he believes the US government is on track to shut down on Wednesday. A shutdown would delay release of key economic indicators like Friday's nonfarm payroll report, and create uncertainty about Federal Reserve rate-cut decisions, and at least temporarily furlough hundreds of thousands of federal workers

·    China’s official manufacturing PMI was 49.8, versus 49.4 in August, and the non-manufacturing measure of activity fell for sixth month to 50 from 50.3, highlighting the risk of an economic slowdown into the final months of 2025 driven by subdued domestic demand and tariff related risks for exporters.

Key Points

·    Equities: Wall Street eked out gains despite shutdown risks; Europe advanced on pharma strength; Asia split as Hong Kong rebounded while Japan slipped, with Tuesday trade cautious.

·    Volatility: VIX closed near 15.8 while Treasury vol held at 75, as investors weigh a possible U.S. shutdown and a heavy data week.

·    Digital Assets: Bitcoin steadies near USD 112,000 and ether above USD 4,100, supported by over USD 1bn in combined ETF inflows.

·    Currencies: JPY firms further, AUD jumps post-RBA

·    Commodities: Another day, another gold record. Crude drops on glut concerns

·    Fixed Income: Japan 2-year yield hits cycle high on weak auction.