US FX WRAP: Dollar rangebound as Canada announces reciprocal tariffs

The Dollar Index was marginally lower, although newsflow was fairly light and geopolitics dominated the tape, once again. There was US data, which failed to move the dial for the Dollar, as Consumer Confidence was mixed, new home sales plunged, and Richmond Fed was soft, but the outlook was more encouraging. The only Fed speaker was 2028 voter Collins, who reiterated familiar Fed rhetoric and how she is concerned about price stability of the mandate.

G10 FX, ex-JPY, managed to eke out slight gains vs. the Greenback, albeit in pretty thin currency specific newsflow. Antipodeans outperformed on the broader risk tone, as the Aussie saw little move overnight on RBA Minutes. Recapping, they stated the board is ready to increase rates if upside risks materialise and several members judged it is possible upside risks to inflation would crystallise, others saw offsetting downside risks and time to assess data.

The Loonie was once again in vogue given the worsening US trade relations, and today Canada announced its retaliatory tariffs; it is applying 15-50% tariffs on around USD 20bln of US products, and the Canadian Government said effective September 8th, counter tariffs will be on around 700 products with 15%, 25% or 50% tariffs. Canadian Government says it will introduce a CAD 7.5bln package to support businesses and workers hit by new US tariffs.

Elsewhere, Europe saw strong German Ifo data, while the HUF was unphased after the NBH cuts rates 25bps to 5.50%, as expected.

Retaliatory tariff cycles between the US and Canada have tended to produce headline-driven intraday swings in CAD rather than sustained trends, with the currency's direction set less by the size of the tariff package than by whether escalation threatens the integrated North American supply chains, particularly energy and autos, where exclusion or inclusion materially changes the growth read. The offsetting fiscal support package matters here: episodes in which retaliation is paired with domestic compensation have historically blunted the growth downgrade and therefore the policy-response channel through which trade friction reaches rates. The pattern in this kind of session is familiar: a rangebound dollar index with soft secondary data failing to move it while geopolitics owns the tape, and G10 drifting on risk tone rather than currency-specific drivers. The RBA minutes sit on the hawkish side of the recent split-board template, where readiness to hike against upside inflation risks keeps front-end Australian rate expectations the operative channel for AUD rather than the minutes' language itself. What is worth watching next is whether the tariff schedule's effective date triggers further US countermeasures and whether CAD risk starts showing up in cross-border yield differentials rather than just spot, the usual tell that a trade spat is migrating from headline noise to a pricing regime.