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Analysts at TD Securities  explained that market sentiment recovered after a risk-off start to the North American session.

Key Quotes:

“Equities gained on both sides of the border (SPX: +0.4%, TSX: +0.2%) while Treasuries saw a modest rally led by 5s and 10s.”

“Canadian rates were little changed on the day, allowing Canada-US spreads to move higher by 2bps in the belly.”

“In G10FX the USD saw a broad rally, with JPY (+0.1%) the sole currency to outperform. GBP (-0.8%) saw an initial knee-jerk higher after the unanimous BoE hike only to retrace lower during Carney’s press conference. CAD (-0.1%) saw only a modest decline against the USD to outperform on the crosses.”

“The US jobs report will be the main focus for markets on Friday.”

“Treasuries will focus on the July payroll report for direction ahead of the weekend. We think a weaker print has the potential to bull steepen the curve, but think curve flattening will persist amid ongoing rate hikes and the BOJ’s defense of YCC.”

“FX investors will quickly turn ahead to Friday’s US NFP report before bedding down for a quieter period in August.”

“USDJPY’s post-BoJ surge stalled at around 112.10, as expected, suggesting the pair’s next move may be data-dependent.”

“We like AUD/JPY put spreads as a proxy hedge for the trade wars theme.”

“Alongside that, the shift in BoC pricing towards October suggests that AUD/CAD has more room to grind lower. It’s held the 0.9555 lows for the year and a break of that level opens up a move towards the May 2016 lows of 0.9326.”

“EUR/USD continues to hold the late-June range, suggesting buying into dips towards 1.16.”