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Analysts at TD Securities explained that that North American markets traded with a modest risk-on tone on the heels of Premier Li’s comments that China will not devalue the Yuan.

Key Quotes:

“US equities closed the session slightly higher (SPX: +0.1%) while the TSX fell 0.3%. Meanwhile, rates saw a modest selloff in both countries with Canada outperforming in the front-end.”

“The USD was little changed against the majors (EUR: +0.1%, GBP: unch, JPY: +0.1%) while AUD (+0.6%) and NZD (+0.5%) led G10 currencies. USDCAD (-0.4%) briefly spiked on reports that the US and Canada are unlikely to reach a NAFTA deal this week, before recovering to end the session near the August lows.”

“NZ GDP and the Norges Bank are the main risk events for Thursday.”

What We’re Watching in Markets
“Risk markets received another boost last night, as Chinese officials reduced the scope for a devaluation in CNH. That is not the same as easing to offset tariff and growth dynamics. Still, it’s enough to inject more lifeblood into global equities, leaving the USD broader weaker as the global risk premium ebbs.”

“This backdrop offers some inspiration to the high-beta G10 currencies. We maintain our tactical upbeat view towards AUD, noting a close of the key 0.7250 level could provide some technical support. A decent NZ GDP report could amplify the gains in NZD as well. CAD should lag its peers, leaving topside in AUDCAD to 0.96.”

“We have updated our CAD trade blotter to exit three positions in our model portfolio. We exit our 4s7s swaps steepener and 3s5s10s fly at a profit and close our short BAU8s trade at a loss.”