EUR/USD, USD/CAD, EUR/GBP flows: Risk still retreating, CAD not celebrating yet; data leaves BoE views unchanged
Risk still correcting while bonds level off, and oil still drifting out
CAD not yet celebrating potential deal, as talks extended
Sterling unmoved by CPI, BoE odds still at that gradual move to one hike view
While bonds slow, US30s some 7bp off yesterday’s highs as the sourer risk tone loops back, equities have remained pressured overnight, led again by the volatile Kospi. Nasdaq more measured -0.3%, but back towards the early August levels again. JGBs also have 30s -5bp filling into Monday’s small gap.
Backdrop still centred on US-Iran digging in with Trump suggesting no talks ongoing or scheduled. Brent +$ ½ and energy complex still creeping out.
On the Canada front, Trump announces a 3-day extension on today’s tariff deadline, suggesting they have a deal subject to finalisation, Carney more measured suggesting ‘substantial progress has been made, although there is important work still to be done’. CAD perhaps a little more lowkey than might be expected, perhaps wary of counting chickens, very much in line with the broader USD pair performance. With the market still positioned very short, there does remain scope for short covering on any confirmation or outperformance of other commodity counters at least if the wider market remains risk heavy. After any further consolidation of the recent pullback, a later break below 1.3845 would look to 138.20-00.
UK CPI data out this morning was largely as expected with the headline back up to 2.9% from 2.6%, as a result of the energy cap lift, though with core also inching to 2.6% from 2.5%. Data this week has largely left sterling unmoved - market pricing still sees odds of one hike gradually build to around 75% by December but sticking at that one hike by next year assumption.