🇪🇺 EUR 

The Euro retains a modest positive bias from weaker US rate expectations, but there is still no strong Euro-specific catalyst to drive sustained outperformance. Recent Euro area data have been relatively constructive, but the improvement remains too limited to materially shift ECB expectations or establish a stronger domestic growth narrative.

The main support is therefore still coming from the USD side, with lower US front-end yields providing room for EUR/USD to grind higher. Against that, fragile European growth and renewed energy risks remain constraints, particularly if Hormuz tensions push energy prices higher and worsen the euro area’s terms of trade.

The bias stays neutral with a slight positive skew. A stronger run of Euro area data or more supportive ECB communication could shift the stance toward weak bullish, while weaker PMIs or renewed energy disruption would reinforce the neutral/bearish side.

🇨🇦 CAD

CAD retains a constructive setup as resilient domestic activity and a softer US rate backdrop continue to provide support, while firmer crude has added another tailwind. The domestic data flow has been solid enough to keep concerns over a sharper Canadian slowdown contained, although the BoC remains cautious and the currency is still heavily exposed to moves in oil.

Oil remains the key swing factor. Sustained strength in crude would reinforce CAD upside, while another sharp correction in energy prices would quickly undermine the trade. Monday’s CPI is therefore important for the domestic rate outlook, with firmer inflation potentially limiting BoC easing expectations and softer inflation removing some of the recent support.

The stance remains weak bullish, with the combination of domestic resilience, softer USD conditions and supportive oil favouring modest CAD upside. A stronger CPI or continued crude strength could build conviction, while weaker inflation or a renewed oil selloff would shift the bias back toward neutral.

Risks to trade:

1. Monday: CPI — Key for BoC rate expectations.
2. Wednesday: ECB President Lagarde Speech, Final CPI — Key for the ECB rate outlook.
3. Thursday: German PPI — Further evidence on domestic price pressures.
4. Friday: Retail Sales — Tests whether recent consumer resilience is holding.
5. Friday: Flash Manufacturing & Services PMI — Important read on the growth backdrop.

UPDATE: 19th August, 26'

Quick loss came as the breaking news hit the wires: US Treasury is increasing by at least double the size of liquidity support buyback operations for longer-dated nominal coupon securities, from the current USD 2bln to at least USD 4bln. As of September 9th. 

Global yields drop, particularly the long end, USD weakens against all peers and equities bid after US Treasury says it will double the size of liquidity support buyback operations for long dated bonds

Weak USD dragged CAD with it while EUR catching a bid.