[MARKET ANALYSIS] FX markets are mostly quiet ahead of this week's risk events, although CAD underperforms amid a US-Canada trade war after talks on Friday broke down and US 50% tariffs on some Canadian goods took effect, while Canada vowed retaliation

DXY: Flat

• Lacks firm conviction and is ultimately flat amid the uneventful picture across most of the FX space aside from CAD, which is pressured amid a US-Canada trade war following the collapse of talks on Friday and with Trump's 50% tariffs on some Canadian goods taking effect, while Canadian PM Carney vowed a dollar-for-dollar retaliation with tariffs on US goods from Sept. 8th. Elsewhere, there were comments from Fed's Kashkari that the Treasury market is functioning as it should and that the recent surge is unlikely to impact monetary policy deliberations, although the rhetoric provided little to shift the dial, as participants await looming key events including the Jackson Hole Symposium later in the week.

EUR/USD: Flat

• Trades sideways after failing to sustain last week's brief reclaim of the 1.1700 handle and amid a lack of major catalysts from the bloc, although it was reported that ECB President Lagarde could become the head of the World Economic Forum at some point next year, while she was described as a putative candidate to head the WEF and was also said to be ready to serve.

GBP/USD: Flat

• Oscillated within a tight range around the 1.3650 level with quiet newsflow from the UK, while the government is to propose giving mayors across England new authority to take control of local planning decisions and approve large-scale developments in their area.

USD/JPY: Flat

• Conforms to the indecisive mood in major FX pairs amid a lack of pertinent drivers and with initial upside momentum thwarted by resistance at the 159.00 level.

Antipodeans: AUD/USD Flat / NZD/USD Flat

• Took a breather after Friday's gains and with price action also contained alongside the mixed risk appetite.

Sessions of this shape, broad FX stasis with one bilateral story doing all the work, are the standard pattern in the days before a marquee central bank event, when positioning in the majors is deliberately kept light and the market waits for guidance on the policy path rather than trading the flow in front of it. The outlier here is CAD, and tariff-driven episodes against the US have historically followed a recognisable sequence: an initial currency underperformance on the announcement and implementation of duties, followed by a second leg only if retaliation broadens the affected trade share, since Canada is the larger trade counterparty for the US and the asymmetry of exposure tends to cap how far CAD weakness runs before hedging and official pushback stabilise it. The distinction worth drawing is between tariffs on a narrow goods set, which typically fade into range trading, and escalation into across-the-board measures, which is what has historically re-priced the cross more durably. Retaliation timing, the announced effective date for Canadian countermeasures, is the concrete next tell, alongside any sign the talks resume, since collapsed-negotiation headlines in past trade disputes have frequently been reversed within weeks. Kashkari's remarks on Treasury market functioning are of the reassuring variety officials tend to offer after sharp rate moves and have rarely shifted the policy debate on their own. The dominant calendar risk remains the symposium later in the week, which is what the flat DXY is actually pricing.