Elon Musk Forms Party Amid Rising US Deficit

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

US Dollar        1.3550-1.3790

Euro                 1.5900-1.6150

Sterling            1.8450-1.8710

WTI Oil (opening level) $67.17

The CAD/USD is opening at 1.3667 ( 0.7317 )

The Trump administration is putting pressure on trade partners to reach new agreements by a Wednesday deadline. Letters will be sent on Monday, warning nations that higher tariffs may be imposed on August 1. The tariff uncertainty could weigh on the risk-sensitive assets like the Canadian Dollar and create a tailwind for the pair. 

Headlines

·    Trade tensions are back in view after Trump said those aligning with the “anti-American policies of BRICS” will face an additional 10% levy. Also today, the US will start sending out tariff letters and also announce trade deals, from 12 pm eastern time, while Treasury Secretary Bessent stated tariffs would return to April 2 levels if no deal is reached. Multiple countries, including Japan, South Korea, India, and others, are scrambling to secure trade deals or extensions to avoid tariffs.

·    Elon Musk launched a political party, criticizing the deficit increase from USD 2 trillion to USD 2.5 trillion under Biden as potentially bankrupting the US.

·    In May 2025, Japan's nominal wages rose 1% year-on-year, below the expected 2.4% increase, due to an 18.7% drop in bonus payments. Real wages fell 2.9%, marking the steepest decline in nearly two years.

·    China's trade surplus increased to USD 103.22 billion, surpassing expectations of USD 101.3 billion, as exports rose and imports fell more than expected. Exports grew 4.8% year-on-year, below the 5.0% estimate and down from April's 8.1% growth.

·    Israel attacked Houthi targets in three Yemeni ports and a power plant, marking its first strike on Yemen in nearly a month, the Israeli military announced on Monday.

Key Points

·    Equities: US tariffs, rotation out of tech, Europe/UK weakness, Asia cautious

·    Volatility: VIX low, options market calm, ±36pt SPX move expected

·    Digital assets: BTC steady, IBIT/ETHA in focus, retail activity strong

·    Fixed Income: US yields soften on trade tensions. Treasury auctions in focus

·    Currencies: USD strength seen against JPY and AUD on tariff threats

·    Commodities: OPEC pumps and crude prices slightly move, Wheat slumps on harvest pressure