Today's expected range for the Canadian Dollar against the major currencies:
US Dollar 1.3740 - 1.3990
Euro 1.5940 - 1.6190
Sterling 1.8610 - 1.8860
WTI Oil (opening level) $99.21
The CAD/USD is opening at 1.3863 ( 0.7213 )
At the beiginining of the this year, ecomomist were projecting a rae cut in September. But with inflation hitting 3.4% in August the prospect of a rate increase is now upon us, and that means higher rates for a longer time.
Bonds are at 5.35% and oil is high due to the risk premium associated with the war in Iran.
The USD will likely strengthen.
Headlines
· Middle East supply risk deepens. Iran and the US are settling in for a prolonged conflict, with little sign of a near-term truce with crude oil spiking higher on Thursday after fighting between Yemen-based Houthi militants and Saudi-backed forces intensified, adding to the disruption already affecting Strait of Hormuz shipping.
· US producer prices rose 0.4% month on month in August, the largest increase in three months, driven by a 1.1% jump in goods prices that included a 24.1% surge in diesel. Annual producer price inflation accelerated to 5.4% from 4.8%, above the 5.3% expected, with the core rate at 4.6%.
· Bond bears are pushing the 10-year Treasury yield towards 5% ahead of US inflation data that could prove decisive for Fed rate-hike expectations. Yields are already at their highest since 2023 and approaching levels last seen in 2007, driven by rising oil prices and inflation concerns. A break above 5% would raise concerns about US debt sustainability while adding further pressure on equities.
· The European Central Bank raised rates and Japanese sentiment strengthened. The ECB lifted the main refinancing rate to 2.65% and the deposit rate to 2.50% with a 25 basis point increase, citing persistent inflation linked to Middle East tensions. It held its 2026 inflation forecast at 3.0% but raised 2027 and 2028 to 2.5% and 2.1%. President Lagarde described growth risks as tilted down and inflation risks up, with policy set meeting by meeting. In Japan, the large manufacturers' business survey index rose to 7.6% in the third quarter from -1.8%, far above the 2.5% forecast, while producer prices rose 7.6% year on year. Today's US consumer price report is the last major inflation reading before the 15 to 16 September Federal Reserve meeting, with headline inflation expected at 0.4% on the month and core at 0.2%. Future outcomes are uncertain and may result in losses.
Key Points
· Macro: Crude and fuel spike and a firm producer price print kept energy costs in focus ahead of CPI
· Equities: US and European equities extended losses as oil and yields climbed, Asia sold off sharply as tightening fears spread
· Volatility: One-day expectations jumped as traders positioned into the inflation report and next week's rate decision
· Digital Assets: Crypto spot steadied overnight while miners and platform names extended the previous session's decline
· Commodities: Crude spike sends precious metals lower while HG copper slumps on tariff doubts
· Fixed Income: Bond yields explode higher in Europe and the US on hawkish ECB, crude oil price surge.
· Currencies: EUR fails to get support from hawkish ECB. JPY steadies and strengthens despite surge in global bond yields.