The Canadian dollar weakened against the U.S. dollar on Tuesday after the White House announced a three-day delay in planned tariffs, citing tentative progress in trade talks. The loonie pared some losses into the North American session but remained under pressure, trading near CAD1.3860 after briefly touching CAD1.3910 overnight.
The delay follows conflicting statements from U.S. and Canadian officials. The White House said a tentative deal had been reached, while Canadian Prime Minister Carney noted "important progress" but emphasized that more work remained. No further details were provided, leaving markets to assess the implications of the temporary reprieve.
The U.S. two-year yield premium over Canada widened for the first time in three sessions, reflecting cautious optimism in fixed-income markets. The loonie’s technical picture remains mixed, with Monday’s low and the 200-day moving average sitting just below CAD1.3850. The 61.8% retracement of the greenback’s rally from May 1 remains slightly above CAD1.3815, offering a potential support level.
Elsewhere in G10 currencies, the euro approached a two-month high near $1.1615 after testing resistance around $1.1600, where options for 1.7 billion euros expire today. The dollar-yen pair eased from Monday’s intervention-era peak near JPY159.80, trading just below JPY159 as the yen showed signs of stabilization.
The British pound recovered from Monday’s soft jobs data low of $1.3520, retesting $1.3565 after briefly dipping below the level in early North American trading. Sterling’s two-month high from Monday stood slightly above $1.3570, with the 61.8% retracement of its 2024 decline targeting $1.3590.
Oil prices rose for a fourth consecutive session, with October WTI crude pushing above $85 per barrel for the first time since July 24. The advance followed reports that the UAE severed all economic ties with Iran, escalating regional tensions. The contract’s intraday high neared $85.40, while a technical resistance level drawn from mid-May’s $91.25 peak aligns with the $86.85 area.
Global equities extended their slump, with the Stoxx 600 in Europe marking its sixth consecutive session of losses. U.S. index futures pointed to softer trading, as a tech-led rout in Asia-Pacific markets weighed on sentiment. Benchmark 10-year yields in Europe and Asia rose modestly, while U.S. and Canadian 10-year yields slipped by around two basis points. The U.S. 10-year Treasury yield held near 4.70% ahead of a $16 billion auction of 20-year bonds.
The U.S. economic calendar featured minutes from last month’s FOMC meeting, where three officials dissented in favor of an immediate rate hike. The terse statement and subsequent minutes offered limited clarity, as the Federal Reserve’s new communication framework takes shape.
In the eurozone, seasonally adjusted trade data showed the current account surplus returned to positive territory in June for the first time in four months, rising to 35.1 billion euros from 31.2 billion euros a year earlier. The ECB projects the surplus will narrow to 1.3% of GDP in 2025, matching IMF estimates.
UK inflation accelerated in July, with headline CPI rising 0.3% month-over-month after a 0.1% increase in June. The year-over-year rate climbed to 2.9% from 2.6%, while core inflation held steady at 2.6%. Service inflation eased slightly to 3.4% year-over-year, down from 3.6% in June. Swaps markets reduced the odds of a near-term policy change following the report, though a quarter-point hike remains fully priced for later this year.
