Canadian Dollar Recovers as US Trade Tensions Rise

Summary

The Canadian dollar recovered most of its initial losses against the US dollar after Canada announced new tariffs on US goods, with USD/CAD at 1.3791, close to last week’s three-month low. Oil prices fell sharply in Asian trading as markets awaited details of tougher US sanctions on Iran. Long-dated US Treasury yields remained elevated, while markets in Japan, South Korea and Taiwan were unsettled.

Equities

The FTSE 100 closed 0.6% higher at 10,816.6 on Friday, leaving the blue-chip index up 0.6% for the week. The FTSE 250 gained 0.9% on Friday but recorded its first weekly decline in six weeks.

Mining shares led the London market higher on Friday. Antofagasta climbed 5.4% and Endeavour Mining rose 4.1% as gold and copper prices strengthened.

Gamma Communications jumped 11.6% on Friday after the British telecoms services provider confirmed early takeover discussions with Netherlands-based Waterland Private Equity Investments. Hunting moved sharply in the opposite direction, falling 14.5% after the energy services company lowered its annual core profit forecast following delays to a major Kuwait Oil Company tender.

British retail sales fell in July following June’s increase, while the UK services sector grew unexpectedly in August. The latest figures came at the end of a week in which the FTSE 100 still managed a modest gain despite wider market volatility.

In the US, the major indices all finished higher on Friday. The Dow Jones rose 0.98% to 53,277.01, the S&P 500 gained 0.43% to 7,674.37 and the Nasdaq Composite added 0.44% to 26,180.46.

Despite Friday’s gains, US equities finished lower over the week. The S&P 500 fell 1.43%, the Nasdaq declined 2.05% and the Dow lost 0.85%, with the S&P 500 and Nasdaq ending three-week winning streaks.

Robinhood surged 13.7% on Friday as cryptocurrency-related shares rallied alongside a sharp rise in bitcoin. Coinbase climbed 8.2% and Strategy gained 6%, while bitcoin advanced 6.4% to its highest level since mid-May.

Ross Stores closed 4.4% higher on Friday after raising its annual profit forecasts and reporting quarterly results ahead of expectations. Investors now turn to results from Nvidia, Salesforce, Intuit and CrowdStrike in the coming week.

Forex & Commodities

The US dollar remained close to multi-month lows early this morning after falling sharply last week, with the US Treasury’s decision to increase purchases of longer-dated government bonds weighing on the currency. The euro strengthened to $1.168, while sterling was firm at $1.365. The Japanese yen remained stronger than 159.0 per dollar, while the Australian and New Zealand dollars traded near three-month highs at $0.7166 and 1.380.

The dollar received some support on Friday after US services activity recorded its strongest growth in nearly two years during August, although this was insufficient to reverse its broader decline. Federal Reserve Chair Kevin Warsh is due to speak at Jackson Hole on Friday, while Bank of Japan Deputy Governor Ryozo Himino speaks on Thursday ahead of September’s policy meeting.

Spot gold rose early this morning to $4,641 an ounce, its highest level in more than three months, after gaining more than 5% last week. The precious metal benefited from the weaker US dollar, with July US PCE inflation figures also due later this week.

Oil prices fell early this morning as traders took profits ahead of Washington’s expected announcement of further sanctions against Iran. Brent crude dropped 1.3% to $93.16 a barrel, while US West Texas Intermediate fell 1.6% to $85.70. Both benchmarks gained more than 5% last week as US-Iran talks remained stalled and oil shipments through the Strait of Hormuz stayed restricted.