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In a market wrap,  analysts at TD Securities explained that a positive resolution to NAFTA talks provided a tailwind to risk sentiment although equities gave up most of their intraday gains early into the session, leaving major indices modestly higher (SPX: +0.4%, TSX: +0.2%).

Key Quotes:

“NAFTA had a more substantial impact on rates, where Canadian yields rose by 8bps across the front-end and belly to widen the spread against Treasuries, which saw a more modest selloff.”

“CAD (+0.7%) was the top performing currency in G10FX against the greenback which saw USD/CAD trade below 1.28 for the first time since May. Cable (+0.1%) popped north of 1.31 on reports of positive Brexit developments before seeing the move unwind.”

“The RBA meets today but a hold at 1.50% is unanimously expected.”

What We’re Watching in Markets
 
“FX markets will have some “speak” to get through with the first of two speeches from Powell and the UK Conservative Conference. Further pushback from Powell on the removal of accommodative  in last week’s decision could weigh on the USD. Meanwhile, harsher rhetoric over Brexit may emerge at the Conservative Conference though this may prove more noise than signal for GBP with May slated to talk on Wednesday.”

“Though the RBA is likely to prove uneventful for the AUD, we like the optics of scaling into long AUD exposure given the nascent improvement in risk appetite (with some dissipation of trade uncertainty), a reduction in FX vols and overextended shorts. Our FV estimate suggests AUD is among the cheapest in the G10 vs. the USD as well. Treasuries and the USD have payrolls and Fed remarks for direction, with particular focus on the two speeches from Powell this week.”