India-Pakistan Tensions Escalate After Airstrikes, Raising Geopolitical Concerns

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.3660-1.3890

Euro                 1.5540-1.5780

Sterling            1.8300-1.8540

WTI Oil (opening level) $58.90

The CAD/USD is opening at 1.3797 ( 0.7248 )

Headlines

·    US-China Trade Talks set to kick off later this week. Treasury Secretary Scott Bessent and trade official Jamieson Greer will meet Chinese counterparts in Switzerland, lifting investor sentiment before the Federal Reserve's expected decision to hold interest rates.

·    Investors will watch today’s FOMC monetary policy statement and any guidance from Fed Chair Jerome Powell at the FOMC press conference late today for hints on future rate changes amid pressure to ease policy from President Trump.

·    Among several other measures targeting support for private sector credit, China’s central bank cut its key policy rate and the reserve ratio requirement for banks to support its economy. The 7-day reverse repo rate was lowered to 1.4% from 1.5%

·    The US trade deficit reached a record $140.5 billion, surpassing the forecast of $137 billion. Imports rose 4.4% to $419 billion due to expected tariffs, with increased purchases of pharmaceuticals, passenger cars, and computer accessories. Exports grew by 0.2% to $278.5 billion, led by passenger cars, natural gas, and computer accessories, while civilian aircraft exports declined.

·    UK-India trade deal cuts tariffs on 90% of UK imports, with 85% tariff-free within a decade, and reduces whisky, gin, and auto tariffs. It's expected to boost UK GDP by GBP 4.8 billion and trade by GBP 25.5 billion annually by 2040.

·    Tensions are running high between India and Pakistan after India launched strikes on seven alleged terror camps in Pakistan after a militant attack in Kashmir killed 26. Pakistan responded, claiming it downed five Indian jets and called the strikes an "act of war,".

 Key Points

·    Equities: Trump trade comments unsettle markets; healthcare sector weak; AMD positive earnings

·    Volatility: VIX edges up; low options volume ahead of Fed and earnings

·    Digital assets: Bitcoin stable; crypto sentiment boosted by US-China trade talks; mixed crypto stocks

·    Fixed Income: Long US treasury yields dipped yesterday after strong US 10-year treasury auction

·    Currencies: USD rebounded overnight after a weak day yesterday ahead of FOMC meeting tonight

·    Commodities: Trade talks lift grains and pro-cyclicals led by crude while gold drops