Today's expected range for the Canadian Dollar against the major currencies:
US Dollar 1.3980-1.4230
Euro 1.5940-1.6190
Sterling 1.8630-1.8880
WTI Oil (opening level) $82.09
The CAD/USD is opening at 1.4101 ( 0.7092 )
USD/CAD continues to trade in a narrow range ahead of the Federal Reserve’s upcoming policy decision. While the Fed is widely expected to leave interest rates unchanged, traders are currently pricing in an unusually high 30.5% chance of an immediate rate hike, signaling notable uncertainty ahead of the announcement. Looking further ahead, markets are factoring in a 76.6% probability of a rate increase in September, reinforcing expectations that global borrowing costs will remain elevated for longer.
Headlines
· The US said it intercepted a surprise Iranian attack on its troops and struck back, ending a three-night pause in hostilities. Iran-backed militias in Iraq hit Saudi oil facilities with drones for a second day, and Iran rejected Oman's proposal for shared control of the Strait of Hormuz, putting supply risk back into the price hours before the Fed decides. API data showed a 3.3 million barrel drop in US crude inventories, underlining tight supply.
· The Fed concludes its two-day meeting today. A hold at 3.50% to 3.75% is the base case, with swaps pricing roughly a 30% chance of a 25 basis point hike. JPMorgan argues that is too high and assigns a 50% probability to a hawkish hold, noting recent energy prices point to disinflation ahead. Chair Warsh's press conference follows the statement.
· US data were mixed. The Case-Shiller 20-city home price index rose 1.6% year-on-year in May, the fastest since August 2025 and above the 1.3% forecast, though real prices fell for a twelfth month with inflation at 4.2%. Chicago led at +6.9%, while Las Vegas fell 1.9%. The goods trade deficit narrowed to 101.5 billion dollars in June from 105.9 billion, and the first-half deficit shrank to 535.5 billion from 716.6 billion a year earlier.
· In Australia, short-dated yields fell sharply as CPI data for June and Q2 came in cooler than expected. The headline June level was out at -0.1% MoM and 3.8% YoY vs. +0.2%/4.0% expected, respectively and the Q2 trimmed-mean CPI measure was out at +0.8% QoQ and 3.6% YoY vs. +0.9%/3.7% expected, respectively. Australian 2-year yields fell some seven basis points in reaction to the data.
Key Points
· Macro: An Iranian missile attack on US forces put oil back on the risk agenda hours before the Fed
· Equities: US and Europe advanced on earnings, while Asia extended its semiconductor sell-off ahead of the Fed and Big Tech results
· Volatility: Index vol eased while same-day risk repriced sharply ahead of the Fed and megacap results
· Digital Assets: Crypto spot held its ground while listed proxies gave back Monday's gains
· Commodities: Crude oil bounce on new US-Iran hostilities. Gold and silver choppy and sideways.
· Fixed Income: US treasuries sideways ahead, uncertain of Fed’s next steps ahead of FOMC decision late today.
· Currencies: US dollar reverses recent surge, eyes FOMC late today. AUD weak on soft inflation data.