US target Iran with economic doom, Canada seem to be treated the same

Good morning

GBPUSD has been pretty rangebound for the past few days, sitting between 1.3620 and 1.3655 for much of the time since Thursday morning.  With little in the way of UK data this week it is difficult to see GBP being the driver of any moves.  One could argue EURUSD has seen similarly tight ranges. Being mostly between 1.1660 and 1.1690 but we have seen a couple of brief forays above that upper level, and as I type we are just testing the lower end.  With GBPUSD and EURUSD at 1.3635 and 1.1660, GBPEUR is a few pips off 1.1700. 

USDJPY is back into the mid-159’s taking GBPJPY to 217.45.  Former BoJ official Adachi has said he expects a rate rise from BoJ next month and then another potentially as early as January.  Whether this would be enough to give Yen a push higher as some have been looking for recently remains to be seen. 

Markets were waiting for Bessent to outline plans to bring about the economic downfall of Iran, or at least get them to a point where they give in enough to allow the Strait of Hormuz to fully reopen.  The plan is still alive but lacking in any specific detail, although he did confirm that countries doing business with Iran would be targeted, adding that no country is out of the reach of the US, including China.  I have no doubt Trump is talking to China behind closed doors about how they could help him achieve his goals but something tells me China would like nothing more than to see the US humiliated.  Oil prices are down a touch, WTI and Brent now $84.50 and $90.00, helped lower by the lack of military activity.  Iran continue to sound defiant.

CAD has weakened again after trade talks between US and Canada broke down. USDCAD is now 1.3860, GBPCAD is 1.8900.  Carney is not backing down but there is a suggestion that up to 90,000 Canadian jobs could be lost if the new 50% tariffs do come into effect on the 1^st Jan 27 deadline. Plenty of time for this to be sorted between now and then, Carney seems to have the backing of the Canadian people for the time being.  He has said the trade talks faltered after late US demands were brought to the table.  Looks like US are treating Canada the same as Iran which seems a little harsh for their North American ‘allies’.

RBA minutes overnight erred on the mildly hawkish side with talk of pre-emptive tightening to deal with upside inflation risks.  This adds more emphasis onto Aussie CPI data which will be released overnight.  GBPAUD currently 1.9085, and with GBPNZD 2.2900 we are left with AUDNZD bang on 1.2000.

Potential for another rangebound day in the world of currencies.  Aussie CPI overnight will be the main event as the markets await tomorrows US core PCE and then the Feds get together at Jackson Hole on Thursday. 

Have a great day…

-  09.00 German IFO

-  13.15 US ADP 4 week average

-  14.00 US house price index

-  15.00 US consumer confidence

-  21.00 Feds Barkin speaks

-  02.30 AUS CPI