Insights 
VT 
The US dollar weakened after reports showed the ISM services index at 49.9 versus an expected 52.0 and ADP employment figures at +37K compared to a previous +110K. The Beige Book indicated a slight decline in economic activity, raising concerns about the US economy.
Markets responded with a 115 pip decline in USD/JPY, while US 10-year yields fell 10 basis points to 4.36%. Gold climbed $21 to $3372, despite WTI crude oil dropping 59 cents to $62.82.
Bank Of Canada Rate Decision
Elsewhere, the Bank of Canada maintained its interest rate at 2.75%, influenced by a 26% market anticipation for a rate cut, contributing to USD/CAD reaching its lowest point since October. The Canadian loonie faced pressure from falling oil prices, despite a moderate increase due to the Bank of Canada’s decision.
GBP/USD peaked at 1.3579 before slightly retreating; meanwhile, the EUR/USD reached 1.1434, retaining its gains more effectively. The focus now shifts to the European Central Bank’s upcoming decision, amidst speculation about its rate path with no expected immediate changes. Additionally, discussions about a potential Canada-US trade agreement are ongoing, as confirmed in talks involving Trump and Putin.
With the recent string of US economic indicators underperforming forecasts, it’s now more apparent that optimism surrounding a quick rebound may have been overdone. The contraction in the ISM services index—the lowest level in years—signals waning demand, not just a temporary dip. Similarly, the ADP data, reflecting a sharp slowdown in job creation, suggests that the broader employment picture might be softening quicker than expected, particularly in sectors traditionally more resilient.
As Treasury yields pulled back by 10 basis points, the move shows that fixed-income markets are beginning to take the Federal Reserve’s neutral stance more seriously. We now see a 4.36% handle on the 10-year as a re-calibration of rate expectations. Traders adjusted swiftly. The drop in the USD/JPY currency pair was sharp and orderly, aligning with shifting rate differentials. This suggests the move was not just knee-jerk, but perhaps an early signal of more sustained USD weakness, at least in the near term.
Gold And Commodity Markets
The strength in gold further underscores how markets are recalibrating risk. The metal’s $21 gain wasn’t a reaction to geopolitical disruptions, nor was it merely speculative. Instead, it reflects hedging against macro softness and the renewed expectation that policymakers will likely step back from further tightening. With WTI crude slipping again, inflationary pressure tied to commodities appears to be diminishing, which will only intensify this perspective.
Policy divergence continues to drive forward in other regions. The Bank of Canada’s unchanged rate put some speculation to rest—at least for now. However, the loonie’s brief strength faded as oil’s losses held more sway. It’s not unusual, given the currency’s tight correlation with energy markets. That said, the reaction wasn’t extreme. The pair touching lows not seen since October shows markets were partly positioned for this outcome already. We saw hedging behaviour pick up ahead of the meeting—a smart move based on the 26% pricing for a cut, which clearly held some influence.
Sterling made a meaningful push to 1.3579 before easing slightly. Its move was unusually efficient compared to past weeks. Meanwhile, the euro held its upward range better, indicating that positioning ahead of the European Central Bank’s decision is starting to shift materially. Though little concrete is expected in the short term, market participants are clearly front-loading expectations around potential guidance tweaks.
The geopolitical context, particularly the quiet resumption of Canada-US trade talks, remains a background factor. Confirmation of engagement between Trump and Putin adds a new layer, though it’s not yet having tangible impact on volatility pricing. That said, such headlines tend to reappear suddenly, and rarely stay contained to rhetoric alone.
Given this backdrop, risk exposure needs careful rebalancing. We are watching rate-sensitive pairs more closely than before, as upcoming data is likely to compound the directional moves already underway. Timing entries harnessed to fixed-income volatility and cross-asset flows will remain particularly effective in the next three to four sessions.
