Tariff Delay Lifts Loonie, Dollar Stays on Back Foot

The White House threw Canada a three-day lifeline. Tariffs on Canadian goods were postponed at the last minute pending further talks, and the Canadian dollar jumped. The greenback has given back most of Monday's gains against the loonie, sliding back toward CAD1.3860. Prime Minister Carney said important progress was made, but more work remains. Details are thin.

The US dollar is lower against most G10 peers. The yen leads the pack, though the greenback has held above JPY159 in European trade. The euro turned bid in Asia and pushed through $1.1610, helped by options for 1.7 billion euros at $1.1600 that expired today. Sterling recovered from a soft UK jobs report and tested $1.3565. The two-month high from Monday sits just above $1.3570.

The Australian dollar is the laggard. It fell to a fresh weekly low near $0.7065 after straddling $0.7100 in quiet trade Monday. Monday's high near $0.7130 overshot the 61.8% retracement of the decline from the May four-year high near $0.7280. A move back above $0.7090 would improve the technical picture.

Oil prices extended their rally. October WTI touched $85.40, its highest since July 24, after the UAE cut economic ties with Iran. Many traders see this as a new escalation. A trendline from the May high ($91.25) and the July high ($88.05) comes in near $86.85 today.

The rout in tech stocks weighed on Asia Pacific bourses and Europe's Stoxx 600, which extended its losing streak to six sessions. US index futures traded softer.

The dollar settled above its five-day moving average against the Mexican peso for the first time since July 27. The risk-off mood, with the S&P 500 down 0.6% and the Nasdaq down 1.2%, weighed on the peso. It is testing MXN17.03 in Europe. A near-term base may have been forged a little below MXN16.98. Initial resistance is near MXN17.09.

The Colombian peso reopened after Monday's holiday and was the strongest currency globally, rising nearly 1.3% against the dollar. Stronger-than-expected Q2 growth of 1.3% quarter-over-quarter helped. President De La Espriella cited private sector estimates of earthquake damage at about COP30 trillion ($9.6 billion). The government activated the first tranche of a World Bank disaster loan of $200 million. International aid has exceeded $1.3 billion.

The greenback reached a three-day high against the offshore yuan near CNH6.7480. It has not traded above CNH6.75 since August 7. The PBOC set the dollar's fix 0.08% lower today, the largest decline in a month. The Bloomberg survey showed an average forecast of CNY6.7432.

The Indian rupee continued to trade heavily despite reports of central bank dollar sales. The greenback rose to INR95.7637, a new high for the month. A move above INR95.80 sets up a test on INR96.00.

The UK's headline CPI accelerated in July. The 0.3% rise followed 0.1% in June, and the year-over-year rate rose to 2.9% from 2.6%. Service inflation rose 3.4% year-over-year, slightly slower than June's 3.6% pace. Core inflation was steady at 2.6%. The swaps market still has a quarter-point hike fully discounted before the end of the year.

Australia's wage price index rose 0.8% in Q2 for a 3.2% year-over-year rate. The Q1 pace was revised to 3.2% from 3.3%.

Japan's core machinery orders recovered 9.7% in June after falling 12.4% in May. The disappointing Q2 GDP had shown the third quarterly decline in private non-residential investment in the past four quarters. Today's report may trim that estimate, but it still was a drag.

Gold posted a bearish outside day, trading on both sides of Monday's range and settling below its low. It made a new marginal low today near $4325 before rebounding to almost $4370 in Europe. Silver took out Monday's high by less than a cent yesterday and then fell through Monday's low near $64.55 to approach last Friday's low near $63.50. It recovered after falling to $62.45 today and is trading near $63.40.

Benchmark 10-year yields rose 2-6 basis points in Asia and Europe, excluding China, while the US Treasury and Canadian bond yields slipped by about two basis points. Asia Pacific yields fell, led by a 5-bp decline in Japan's benchmark. The 10-year Treasury yield is nearly flat at 4.70%. The US will sell $16 billion of 20-year bonds today.

The US highlight today is the minutes from last month's FOMC meeting. Three officials dissented in favor of an immediate hike. The statement was terse. The minutes are unlikely to be much better. Even before the task forces have completed their assignments, the new communication style is being implemented.

Earlier this month, the eurozone reported that its seasonally adjusted trade balance swung back into surplus in June for the first time in four months. The current account surplus through May is running about 2 billion euros more a month than in the first five months of 2025. In June, it rose to 35.1 billion euros from 31.2 billion in June 2025. The eurozone's current account surplus in 2025 was about 1.7% of GDP, and the ECB expects it to slip to 1.3% this year, the same as the IMF.