Today's expected range for the Canadian Dollar against the major currencies:
US Dollar 1.3980-1.4230
Euro 1.5930-1.6180
Sterling 1.8660-1.8910
WTI Oil (opening level) $83.98
The CAD/USD is opening at 1.4105 ( 0.7090 )
Oil prices have tumbled at market opening times, as markets cling to hopes of a diplomatic outcome that will lead to an agreement to resume free Oil traffic.
The calendar is practically empty on today, with all eyes on the US Federal Reserve’s Monetary Policy meeting, due on Thursday. Markets are pricing a nearly 33% chance of a rate hike, but the most likely scenario remains a “hold”, with the tone of the bank’s statement and Warsh’s comments at the ensuing press conference likely to determine the US Dollar’s near-term direction.
Against this backdrop, analysts see the risk skewed to the upside for the USD. They argues that a hawkish Fed hold, and a goldilocks-like US macro backdrop can offer USD near-term support, suggesting that policy and data dynamics still lean in the USD’s favor. All of these indicators will help refine market expectations for the strength of USD.
Headlines
· The US suspended strikes against Iran for a second night, easing supply-disruption fears after almost two weeks of conflict. The unannounced pause began late Friday, with Tehran saying it had halted retaliatory operations and held talks with Oman over the Strait of Hormuz. Iran-backed Houthi forces claimed weekend attacks on Saudi Aramco-linked facilities at the Red Sea ports of Jizan and Yanbu, leaving a residual risk premium in place.
· Wednesday's Fed decision is now a live event. Bond markets enter the week pricing better than a one-in-three probability of a rate hike, a marked shift from expectations of an extended hold. A hold remains the base case, and the tone of the statement and press conference will carry more weight than the decision itself.
· Data were firm across the board. The S&P Global US Services PMI rose to 53.6 in July from 51.2, the fastest growth this year, though input costs hit a 14-month high; manufacturing edged down to 53.8. New single-family home sales rose 1.6% in June to an annualised 628,000. In Europe, the UK composite PMI returned to expansion at 52.1 from 49.3, and the eurozone services PMI rose to 51.6 from 49.4.
Key Points
· Macro: A two-night pause in US strikes on Iran pulled oil sharply lower and reset the risk mood before Wednesday's Fed decision
· Equities: US futures point to a chip-led rebound after a soft Friday close, Asia opened higher on the de-escalation
· Volatility: VIX held near 18.6 into a Fed week, with the curve in contango and oil vol still running near four times equity vol
· Digital Assets: Crypto firmed overnight with the relief rally after two sessions of heavy ETF redemptions
· Commodities: Brent gapped below 90 dollars on the strike pause while gold pushed back above 4,100
· Fixed Income: Treasuries rallied across the curve as cheaper oil eased inflation fears before a live FOMC
· Currencies: The dollar weakened against every G10 peer as the haven bid unwound; MAS tightening lifted the Singapore dollar