Geopolitics Continue to Hit Markets – Dow Down 1.1%
Geopolitical updates continued to dominate market movements yesterday, as further tariff updates and a ceasefire in Ukraine led to increased volatility. US stock markets once again closed in the red, though the decline was less severe than the previous day’s rout. The Dow dropped 1.14%, the S&P fell 0.76%, and the Nasdaq declined just 0.18% as some positive news filtered through the uncertainty. Treasury yields rebounded from recent lows, with the 2-year yield rising by 6 basis points to 3.943% and the 10-year yield increasing by 6.7 basis points to 4.280%. Meanwhile, the dollar weakened further, with the DXY down 0.4% to 103.43. Oil prices gained some ground but remained under pressure, with Brent rising 0.89% to $69.90 and WTI increasing 0.33% to $66.25. Gold pushed higher on the back of the weaker greenback, up 1.25% to $2,916.58 per ounce.
Bank of Canada Rate Call in Focus
The Canadian dollar has been in sharp focus for currency traders over the past few months and, more recently, in the past few hours, as tariff and counter-tariff updates have triggered sharp movements in one of the least liquid major pairs. However, interest rate differentials will briefly take centre stage today as the Bank of Canada announces its latest rate decision. The Bank is widely expected (80% priced in) to reduce interest rates again by 25 basis points, lowering the base rate from 3.00% to 2.75%. However, traders anticipate greater currency movement following updates on the Bank’s outlook in its statement and subsequent press conference later in the day. A key focus will be the potential impact of US tariffs and whether these could push the Bank towards a more dovish stance. Should this occur, the beleaguered Loonie may face further downside pressure.
Event Calendar Kicks into Action Today
From a macroeconomic calendar perspective, today is expected to be the busiest day of the week for traders. However, as observed over the past six sessions, geopolitical updates continue to dominate market sentiment. Nevertheless, two key events later today could have a significant impact on their respective markets. There are no major releases scheduled during the Asian session, though ECB President Christine Lagarde is set to speak during the European trading day. The main focus, however, will be on the US open and the crucial CPI data. Expectations are for a 0.3% month-on-month increase, and any substantial deviation from this figure could trigger significant market movements. The US inflation data will be swiftly followed by the Bank of Canada’s latest rate decision, policy statement, and press conference, all of which are expected to add further volatility to the Loonie.
