[MARKET ANALYSIS] USD lifted against all G10 peers; action most pronounced against CAD after breakdown of trade talks

• USD is firmer against all G10 peers to varying degrees, with moves vs CAD most pronounced after trade updates. DXY is at session highs just above 99.00 after breaking out of 98.90 resistance, the next level is the 200DMA @99.17, ahead of this, resistance is likely weak.
• A lot of focus on USD “debasement” after alternative assets BTC and Gold outperformed last week, the market today is clawing back some of these losses with DXY edging higher and BTC off Friday's highs, however gold is firmer, potentially signalling a haven bid with global equities mostly weaker. In terms of developments over the weekend, Bessent wrote a hawkish FT piece, while Iran returned the language noting "not a single drop of oil" would leave the Persian Gulf. On that note, we expect Bessent to explain the latest sanctions in a presser this evening. Oil is not convinced by these developments with Brent down ~1%. A busy week ahead sees PCE, GDP, and Nvidia earnings hit Wednesday; Jackson Hole and US supply data land Thursday. Friday brings the NFP Annual Revision Prelim and remarks from Fed Chair Warsh. While we do not have a specific time yet, Bessent could also announce “increased focus on fiscal consolidation”; which most desks have been sceptical on over the past week.
• CAD is the clear G10 underperformer after the unexpected breakdown of trade negotiations between the US and Canada, with the latter imposing dollar-for-dollar 50% tariffs on US goods. To remind, the updates we had on Friday said that their respective trade officials would meet in Washington to finalise the deal. USD/CAD looks to return to the 200DMA which it fell beneath on Wednesday, however a renewed trade war could lead to some USD weakness. MUFG reckons the CAD sell-off does not have legs, noting it targets just 5% of Canada’s exports.
• Action elsewhere is quiet, Antipodeans are lower amid the risk tone, AUD/NZD +0.1%, supported at 1.20, Scandis are also weaker with NOK suffering from the dull tone and weaker oil prices, while EUR/USD and GBP/USD are a touch weaker against the Buck around 1.1660 and 1.3630 respectively.

Broad dollar strength with a single-currency driver on top is the classic G10 session template: a risk-off or idiosyncratic shock lifts the dollar across the board, and the pair attached to the catalyst does the outsized move. Trade-talk breakdowns have a well-worn pattern in this pair historically: an initial CAD sell-off on the headline, then a partial fade as the scope of the measures becomes clear, with dollar-for-dollar retaliation episodes in past cycles tending to stall once the affected share of exports is quantified rather than repricing the whole relationship. The noted pushback that the measures touch only a small slice of exports is the standard first counterargument in these episodes, and it is usually correct on day one unless escalation follows. The tension worth isolating is that a genuine bilateral trade war cuts against the dollar as well as against CAD, so a USD/CAD squeeze on the breakdown headline can reverse if the conflict broadens, while the dollar's broader bid rests on the hawkish fiscal and sanctions rhetoric running in parallel. Follow-ons are the Treasury sanctions presser, whether trade officials confirm or walk back the rupture, and a heavy calendar of inflation and growth prints that will test whether the dollar move is positioning-driven or durable. As a session wrap, the note is commentary rather than a discrete event; the trade headline is the only hard catalyst in it.