The U.S. dollar advanced against most major currencies on Monday as trade frictions with Canada intensified and U.S. sanctions on Iran tightened, fueling risk aversion across markets.
Trade talks between Washington and Ottawa collapsed last week after President Trump granted Canada a three-day reprieve from 50% tariffs on $20 billion of Canadian goods under the USMCA framework. Canadian Prime Minister Carney acknowledged progress but noted significant unresolved issues remain, raising the risk of further escalation. Meanwhile, U.S. economic sanctions on Iran are intensifying, with Treasury Secretary Bessent set to outline the measures in a press conference later on Monday. Analysts highlight the potential for secondary sanctions against violators, with China’s response a key focus ahead of President Xi’s upcoming visit to Washington.
The dollar gained broadly, with the euro falling to a three-day low near $1.1660 in European trading. A break below $1.1650 could reinforce caution, while a move through $1.1620 may signal a technical correction, according to the analysis. The yen remained under pressure, with the dollar rising to a three-day high of nearly ¥159.30, nearing the ¥160 level that could prompt official intervention. Sterling also retreated from a six-month high of $1.3675, trading near $1.3620 as North American participants pared gains.
The Canadian dollar weakened to its best level in three months against the greenback, with the USD/CAD pair rebounding from a low of C$1.3730 to nearly C$1.3845. The 200-day moving average at C$1.3900 remains a key resistance level, while the analysis notes stretched intraday momentum indicators. The Australian dollar consolidated near a six-month high of $0.7180, with resistance seen at $0.7200. A break below $0.7135 could indicate a corrective phase.
Emerging-market currencies showed mixed performance. The Mexican peso hovered near MXN16.91, with the dollar making a marginal new low before recovering. The offshore yuan strengthened to a two-month high below CNH6.7130, though the People’s Bank of China set a higher daily reference rate for the second consecutive session. The Indian rupee remained within last week’s range, capped near INR95.75.
Equity markets were mixed, with U.S. futures pointing to modest declines after a mixed session on Friday. The S&P 500 and Nasdaq Composite remain below key gap levels from earlier in the month, while Asian bourses fell over 1%, with Australia the notable exception. U.S. Treasury yields edged lower, with the 10-year note down nearly three basis points to 4.71%, following a rise to a 2025 high of 4.74% last week.
Commodities were supported by geopolitical risks. Gold extended gains to a three-month high above $4,660 an ounce, having risen 5.7% last week to $4,632. Silver traded above $70 for the first time since mid-June, with a move toward $72.25 on the 200-day moving average possible. October WTI crude oil, meanwhile, pulled back from a six-day rally, falling 2.25% to consolidate near $85.80-$87.50.
A quiet U.S. economic calendar featured the Chicago Fed’s National Activity Index, which contracted in Q1 and Q2 despite stronger headline GDP growth. Mexico’s Q2 GDP data, due later on Monday, is expected to confirm a 1.5% quarter-over-quarter expansion, the strongest since late 2020.
