Analysts at TD Securities explained that the market sentiment was upbeat in North America with the S&P 500 trading near January highs on a 0.2% advance while Canadian equities closed 0.2% lower.
Key Quotes:
“Treasuries bear-flattened from 5s onwards on a 3bp selloff in the belly while Canadian rates outperformed, most notably in the front-end.”
“The USD was broadly weaker against G10 FX in the wake of President Trump’s open criticism of the Fed. EUR (+0.8%) and GBP (+0.8%) led the advance with the former trading through 1.16 before retracing lower. JPY (-0.3%) was the sole G10 currency to underperform the USD while CAD saw little change.”
“NZ retail sales and AU construction are the main data releases for Wednesday ahead of Canadian retail sales later in the day.”
What we’re watching in markets
“The stretched USD has required a trigger to release some of the energy captured in our dashboard. Trump offered a release valve, implying that the Fed is undoing his work on the economy. The USD is down across the board which releases tension on the EM complex and allows G10 to adjust from weeks of selling pressure.”
“AUD/NZD continues to grind higher (although never in a straight line) with this morning’s NZ retail sales print the next catalyst. A big disappointment (mkt +0.4%/q) could see a retest of 1.12.”
“The July FOMC minutes may be more interesting than Jackson Hole if the Fed discusses longer-term plans for the balance sheet. The 5s30s curve should continue flattening as broader risk sentiment remains positive, but talk of ending balance sheet runoff could steepen the curve.”
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