Forexlive Americas FX news wrap: Oil settles at the lowest since 2021

• BOC’s Macklem: Bigger cuts are possile if economy and CPI weaker
• Macklem Q&A: Employment is not negative but is well below population growth
• BOC’s Macklem: Trade disruptions may mean larger deviations from our target
• Bank of Japan officials see little need to hike rates
• US Treasury auctions $58B of 3 year notes at a high yield of 3.440%
• Fed’s Barr comments on Basel rules
• US CPI preview: Inflation expected to fall to the lowest since 2021
• US August NFIB small business optimism index 91.2 vs 93.7 prior

Markets:

• Gold up $11 to $2516
• WTI crude oil down $2.58 to $66.13
• US 10-year yields down 5.1 bps to 3.65%
• S&P 500 up 0.45%
• JPY leads, CAD lags

USD/CAD was particularly strong as Macklem’s comments suggested an effort to put a 50 bps cut on the table for the October meeting if economic data continues to disappoint, particularly on growth. The pair is back into the April-July range and has now broken out on either side of it in what’s been a tough technical trade. Surely the drop in oil prices is also weighing on the loonie.

The pound and euro were particularly weak in late European trade but steadied from there and cable managed to recover into positive territory on the day in a nearly 30 pip late-day climb.

With falling yields, USD/JPY was dragged lower again, finishing the day down 85 pips and erasing the weekly gain. Across the board, yen trades are perilously close to breaking down again in what could be a red flag for all markets. USD/JPY is only about 50 pips above the spike low fro August.

The drop in yields raises the stakes for Wednesday’s CPI report and some eyes are also on the debate later today. That’s sure to underscore that there is no serious candidate on deficit reduction.

Tuesday’s trade was light in terms of newsflow but presented a divergence in overall sentiment. Bonds and the yen were bid strongly (particularly after the auction) while equities firmed led by tech. Oil also painted a very downbeat picture on the global economy as the settlement was the lowest since 2021 on selling in six of the past seven days.

This article was written by Adam Button at www.forexlive.com.