Macro Prospect

Relaunched in 2026 / Identifying global risks & opportunities through geopolitics, macroeconomics and markets.
Market analysis. Not financial advice.

[Macro Prospect @macroprospect]

No tariffs on Canada. Trump says the US and Canada have struck a deal.

Big risk-on headline — you could see it in FX straight away with USD selling off. The tariff suspension cuts trade war risk, and that's been supportive for CAD and broader risk sentiment.

Trump also floated reviving the Keystone XL pipeline from Canada.

Longer-term this fits the broader diversification story — more oil coming in from Venezuela, and now potentially Canada too. Could take some heat off global energy markets given everything going on in the Middle East. For now though, the Strait of Hormuz situation stays tense. The pipeline is a real fundamental that could hit oil prices hard if US-Iran tensions cool off — but until we stop seeing attacks on shipping and tension in the Strait, oil stays a Middle East story, full stop. Adding to that: Iran's renewed threats against US bases in Europe, plus a total freeze in economic flows between the UAE and Iran. So realistically, it'll take either a new US-Iran deal or a genuine de-escalation before supply diversification becomes a serious bearish argument for oil. Also worth watching Trump's speech today — he could drop something meaningful on the Middle East or on diversifying oil sourcing, which would be an interesting angle after today's data showed US oil inventories coming in higher than expected.

Another rough day for South Korean equities, on talk of the US scaling back its military footprint in the country. Not exactly a shock — it's been clear for years the US would pull back engagement across parts of the world to focus on its own market and select regions, in line with the new strategy laid out by the Department of War. At the same time, we're hearing US-North Korea relations are in a pretty good place right now — could be tied to the pullback from South Korea.

Treasury is at least doubling the max size of its long-end bond buyback operations — mild negative for USD. Solid macro headline that adds another USD-bearish argument on top of the Canada tariff story. Not a huge FX mover on its own, more of a bond-market thing, but it's adding fuel to the risk sentiment that's been building since the Asian session. Bigger for FX today: the FOMC Minutes, plus Trump's speech later in the US session. The market isn't sitting extremely long USD right now, so a surprisingly hawkish set of Minutes could give the dollar a bigger pop than people expect — whereas a dovish read would mostly just confirm the move that's already happened. CAD is the trade to watch today — backed by geopolitics, macro, and sentiment around tight US oil inventories per analyst forecasts. Oil-sensitive as it is, CAD should stay supported, though today's inventory miss could see some of those long positions trimmed. Still, geopolitics and macro remain firmly in CAD's corner. Real resolution comes late in the US session — post-FOMC, post-Trump speech — and then whatever fresh flows show up at tomorrow's Asia open.

Moderna ripping higher on cancer vaccine news — stock up 140%.

Apple's reworking its App Store policy for EU markets — stock climbing after a rough month.

Small bounce in Meta after two brutal down days tied to lawsuits over social media's harm.

Lots of buying in the cryptocurrency market. Strong growth in crypto.

[Macro Prospect @macroprospect]

Iran’s saying attacks on Israel are getting easier than before. US struck Iran again, Israel’s threatening more strikes on energy infrastructure, and Iran’s hitting back at targets across the region. Another confirmation this conflict isn’t cooling off, not really a fresh shock at this point. Also worth watching for long unwinding in oil like we flagged before. A lot of investors are already loaded up on WTI longs after several days of gains, and with the weekend coming up that matters, because energy market will be closed. Saturday and Sunday could bring all kinds of scenarios out of the Middle East.

China’s set to take 60% of Russia’s gas exports by 2030. Russia and China are also planning joint military drills. Russia’s clearly ramping up its pivot of energy flows from Europe to Asia. So we’re seeing more steps in China’s energy diversification play, like we’ve flagged in earlier pieces. That diversification plus the Hormuz conflict could put energy front and center in the Trump Xi meeting negotiations. Worth watching headlines around that meeting and how it feeds into oil.

Trump posted on Truth Social saying the Fed should cut rates after the strong NFP print. Sounds like the logic here is a stronger economy should mean cheaper credit, so lower rates. But that’s pretty much the opposite of how the Fed usually reads things. So we’ve got data that’s actually USD supportive, but Trump’s message is pushing for cuts anyway. Back to USDJPY, we’ve been tracking the decline since Wednesday, a really strong move on that pair. Worth watching how the market handles this now, with data on one side and a conflicting headline on the other. Also worth noting some traders will likely trim USDJPY exposure heading into the weekend, since FX shuts down and a lot can happen over Saturday and Sunday.

[Macro Prospect @macroprospect]

There’s word of a possible peace deal between Russia and Ukraine. Ukraine’s foreign ministry is also talking about new momentum in diplomatic efforts. Biggest market impact from this is probably in wheat. Chicago wheat futures dropped over 2% after Putin’s comments. An actual end to the Russia Ukraine war would mean normalized grain trade and a lower risk premium in the Black Sea region. Market did buy into the peace possibility a bit, but not enough to wipe out the much bigger overhang right now, the Middle East conflict.

Trump and Xi are set to meet soon in Washington. Word is the market’s currently pricing in managed stability, an attempt to avoid escalation without actually resolving the structural US China conflict. Fits the broader story we’ve been building on, the trade war between the two powers moving from new tech to semiconductors to AI and now possibly into energy. Yesterday’s G20 made that pretty clear. 19 countries backed the US position on cheap Chinese exports, while China stood alone as the major opponent. But the September meeting in Washington could end up touching on something even bigger, the Strait of Hormuz. The US wants control over the Strait while China wants free passage for tankers since 80% of Iran’s oil goes to China. Possible we get some de escalatory comments on the Middle East from Washington and Beijing during or after the meeting. One sign this could come up is Xi’s recent visit to Egypt, showing China’s stepping up its interest in the Middle East. Important for WTI - Question now is whether Xi actually offers Trump help resolving Hormuz in exchange for economic concessions. Meeting’s scheduled for September 24. Worth watching headlines and speculation in the week leading up to it, since early investor sentiment could start forming ahead of time. Worth tracking both that sentiment and the actual outcome of the meeting from an oil market angle.

On FX, JPY gained around 2% against USD today, and about 2.5% over two days. That’s a huge move for G10 and for FOREX broadly. USDJPY has been dropping hard since yesterday. Like we flagged in yesterday’s piece, macro’s been turning in the yen’s favor against the dollar. Worth watching the move on USDJPY closely, especially any early signs of large short covering, getting out of trades. Thursday and Friday’s data will matter a lot for USD too, worth keeping an eye on the data toward the end of the week.

[Macro Prospect @macroprospect]

Russia says it’ll back Iran through the war with the US. That came out of the Shanghai Cooperation Organization leaders meeting on September 1. Matters because Russia, as a major energy exporter, stands to benefit from higher prices.

Also today, Iran says it hit US targets in Bahrain, Iraq, Jordan, and Kuwait. Analysts are calling today’s exchange the biggest US Iran clash since July. Hormuz traffic is extremely thin right now too, only 4 commercial vessels passed through Tuesday versus roughly 13 a day average over the prior 10 days. There’s also speculation that Iran says two tankers were disabled after hitting mines in Hormuz, which directly contradicts yesterday’s US claim that no mines were present. Possible Iran’s actually trying to control which ships can use Hormuz rather than just striking random vessels, and that’s backed up by fresh threats of sanctions against shipowners using unauthorized routes. That could build a narrative around Iran having tighter control over the Strait and oil flows, which might be part of why we’re seeing a slight pullback today after two days of gains on $WTI and $BRENT. Possible investors are now trying to price how much physical oil actually gets lost after such a sharp two day rally. Also, US Energy Secretary Chris Wright said over 17 million barrels have already passed through Hormuz. Analysts point out that despite the conflict, oil is still moving through the Strait partly via ship to ship transfers, which could be driving some profit taking on those two day long positions. Looks more like a short term geopolitical premium than full market conviction on a structural global energy shortage. Still worth remembering further escalation could push oil higher again after any pullback, especially with Trump’s comments signaling reluctance to strike a deal.

Comments from Williams, Takata, and Breman, plus the RBNZ policy statement, suggest the global energy shock from the Middle East is starting to filter into monetary policy. Important for FX. There is probability that central banks are getting less willing to look through inflation. Odds of a BoJ hike are climbing too. FOREX market may already be pricing that in, $USDJPY dropped today, and Takata’s comments are being flagged as one reason for the sentiment shift. Worth watching USDJPY downside from here. Also keep an eye on Thursday and Friday’s data, which could drive fresh speculation and increase volatility on $USD, especially after weeks where macro had briefly been leaning in the dollar’s favor.

[Macro Prospect @macroprospect]

@LongGameEquity hopefully, but current geopolitics is changing players' sentiments from day to day

[Macro Prospect @macroprospect]

No tariffs on Canada. Trump says the US and Canada have struck a deal.

Big risk-on headline — you could see it in FX straight away with USD selling off. The tariff suspension cuts trade war risk, and that's been supportive for CAD and broader risk sentiment.

Trump also floated reviving the Keystone XL pipeline from Canada.

Longer-term this fits the broader diversification story — more oil coming in from Venezuela, and now potentially Canada too. Could take some heat off global energy markets given everything going on in the Middle East. For now though, the Strait of Hormuz situation stays tense. The pipeline is a real fundamental that could hit oil prices hard if US-Iran tensions cool off — but until we stop seeing attacks on shipping and tension in the Strait, oil stays a Middle East story, full stop. Adding to that: Iran's renewed threats against US bases in Europe, plus a total freeze in economic flows between the UAE and Iran. So realistically, it'll take either a new US-Iran deal or a genuine de-escalation before supply diversification becomes a serious bearish argument for oil. Also worth watching Trump's speech today — he could drop something meaningful on the Middle East or on diversifying oil sourcing, which would be an interesting angle after today's data showed US oil inventories coming in higher than expected.

Another rough day for South Korean equities, on talk of the US scaling back its military footprint in the country. Not exactly a shock — it's been clear for years the US would pull back engagement across parts of the world to focus on its own market and select regions, in line with the new strategy laid out by the Department of War. At the same time, we're hearing US-North Korea relations are in a pretty good place right now — could be tied to the pullback from South Korea.

Treasury is at least doubling the max size of its long-end bond buyback operations — mild negative for USD. Solid macro headline that adds another USD-bearish argument on top of the Canada tariff story. Not a huge FX mover on its own, more of a bond-market thing, but it's adding fuel to the risk sentiment that's been building since the Asian session. Bigger for FX today: the FOMC Minutes, plus Trump's speech later in the US session. The market isn't sitting extremely long USD right now, so a surprisingly hawkish set of Minutes could give the dollar a bigger pop than people expect — whereas a dovish read would mostly just confirm the move that's already happened. CAD is the trade to watch today — backed by geopolitics, macro, and sentiment around tight US oil inventories per analyst forecasts. Oil-sensitive as it is, CAD should stay supported, though today's inventory miss could see some of those long positions trimmed. Still, geopolitics and macro remain firmly in CAD's corner. Real resolution comes late in the US session — post-FOMC, post-Trump speech — and then whatever fresh flows show up at tomorrow's Asia open.

Moderna ripping higher on cancer vaccine news — stock up 140%.

Apple's reworking its App Store policy for EU markets — stock climbing after a rough month.

Small bounce in Meta after two brutal down days tied to lawsuits over social media's harm.

Lots of buying in the cryptocurrency market. Strong growth in crypto.

[Macro Prospect @macroprospect]

More tanker strikes in the Strait of Hormuz. Two supertankers, Sidr and Senegal Prosperity, carrying Saudi crude were hit overnight Monday into Tuesday. That’s pushed Middle East risk higher for a second straight day and lifted oil prices again. $WTI has been reacting to Gulf risk off for two sessions now, and it looks like investors have temporarily stopped pricing in the Venezuela supply diversification hedge. Only 5 ships passed through Hormuz on Monday, versus a 14 ship average over the past 10 days. So average vessel flow through the Strait is shrinking, which is also feeding these sharp moves in $WTI. Resistance has been skewing toward higher oil prices for two days now, but worth watching Middle East headlines closely since that Venezuela hedge is still in the background, and any risk on headline could shake up energy fast.

Iran says it would sign a deal if the US honored its June commitments, but claims the US is in breach, which is blocking a return to the agreement. President Masoud Pezeshkian says he’d reciprocate immediately if Washington returned to the June Memorandum of Understanding terms. Mildly de escalatory, but still a promise about the future rather than a fact, and it’s explicitly framed as the US’s move to make.

Bessent says “Economic Outcast” will push Iran toward wanting a deal. Also mildly de escalatory. Read as the US trying to use economic pressure to push Iran back toward an economic rather than military conflict. That fuels some speculation on a better outlook for energy markets, though today’s missile strikes on shipping have tipped the scale against those hopes for now.

CENTCOM says no vessel has struck a mine in the Strait of Hormuz. Market isn’t treating that as a breakthrough though, since the real problem stays the direct attacks on tankers and very low traffic through Hormuz.

Trump says GDP could grow 14 to 20% and that the Fed shouldn’t hike. Sentiment among FX investors and traders is increasingly leaning toward inflation though, which is a growing problem in the US given the current geopolitical backdrop, high oil prices, and Trump’s promises of a strong economy, all of which could add to speculation around a September hike from the Fed.

Really important FOREX detail: yesterday’s $USD reaction to renewed Middle East conflict. For the first time since the US Iran war began, the dollar actually sold off on the resumption of kinetic exchanges after the ceasefire period. On the 1D timeframe it dropped against every major currency, and interestingly the most on $USDCAD, where the loonie got strong support from the sharp move higher in $WTI, given how dependent Canada’s economy is on energy prices as one of the main commodity exporters. Big one to watch this week: Friday’s NFP, unemployment rate, and average hourly earnings, plus Thursday’s ISM services, which should help clarify how investors and traders are building rate speculation given Trump and the Fed’s conflicting signals, and the first ever since US-Iran war started, divergent $USD reaction to a major risk off event after the ceasefire was broken.

Sharp losses across US indices yesterday (Aug 31) after kinetic exchanges resumed following the collapse of the economic pressure approach on Iran. Heavy declines on $RUT, $SPX, and $DJI. However $NDX held up best though, likely supported by buying in tech and AI names. $NVDA was even up around 1.4% despite the US Iran escalation. Could be down to rotation out of small caps exposed to geopolitical risk and into large, liquid names. Looks like we saw a rotation within US equities yesterday, out of small caps and into highly liquid tech and AI.

[Macro Prospect @macroprospect]

Trump told Fox News the US will respond to the attack on American forces overnight, saying the US will hit Iran hard.

Iranian official Kazem Gharibabadi says there’ll be a response following the US strike on Larak Island.

We’ve got a real shift in the Middle East here, moving from “economic pressure” on Iran into actual direct military action. The US struck two Iranian missile launchers on Larak, and Iran responded with attacks on US bases in Jordan. The military action happened right by the Strait of Hormuz, so the market’s back to pricing in disruption risk for $WTI flows. Like we said last week, the earlier oil selloff was likely tied to hedging around a calmer Middle East plus the Venezuela diversification story. But now that risk off is back in the Strait, that diversification narrative could take a back seat again. Also worth noting: sharp declines on Gulf exchanges in Dubai, Abu Dhabi, and Qatar, which shows investors are treating this as a serious risk off event for the GCC. Pressure mounting across $DFMGI, $ADI, and $DSM. UAE officials are also saying the Memorandum of Understanding didn’t produce an actual agreement.

Real question now is how long this Gulf risk off holds. For now Trump’s signaling the US will hit Iran hard, which could keep fueling upside risk in oil.

There are reports that Hormuz vessel traffic rose over 30% last week, mostly tankers and LNG carriers. Reuters estimates total flow at 15 to 16 million b/d, still below prewar levels but up from the August 17 to 23 period. So even as military tension picks back up, we’re actually seeing a modest increase in flows. On top of that we had the potential hedge from South American supply diversification. Worth watching statements from both sides closely, since fresh negotiations or a pause in missile strikes could ease oil prices through those factors mentioned above. But right now, with the escalation narrative back in play, line of resistance in energy is probably skewed higher. Situation’s moving fast and any major headline could flip the picture, so worth tracking this live.

This all fits pretty neatly with what we flagged yesterday about the US China trade war spilling into energy and hitting FX, especially $USDCNY and $USDCNH. We’re also hearing China’s already cutting back on Iranian oil imports, and Carnegie notes Iran’s been using RMB for trade through Hormuz, so paradoxically this crisis could actually boost the yuan’s role. On the flip side, Economic D-Day and Economic Outcast could weigh on CNY. Then there’s the PBoC, which can lean on the fixing and state banks to keep the yuan from moving too much in either direction. Worth watching Chinese economic data and the broader FOREX picture, since this geopolitical backdrop could bring extra volatility to currencies sensitive to risk swings. Wouldn’t be surprised if the PBoC tries to cap excess volatility and control the pace of any CNY move either way. Adding fuel to the fire: Bessent wants G20 countries to revisit trade terms with China and consider tougher barriers on Chinese imports.

[Macro Prospect @macroprospect]

Trump’s “Economic Outcast” and “Economic D-Day” operations are designed to force Iran into submission through financial and economic pressure, but the more interesting angle might be the knock-on effect for countries doing business with Iran, like China, Russia, India, and Turkey. China’s the big one here, since Iran sends 80% of its oil there. Question worth asking: could the US-China trade war that kicked off in 2018 spill into a new dimension, or even escalate further? That conflict started with sanctions on Chinese tech, Huawei included, and over a few years spread into semiconductors, AI, and autos. Worth watching whether it now bleeds into energy too, China needs Iran to keep oil prices where they are and stay the export powerhouse it’s become since 2018, having ramped up exports globally and especially into the Global South, which has benefited from cheaper Chinese goods versus Western alternatives. Any disruption to energy flows could end up cutting into the China-Iran oil trade.

That said, China’s got options, it can buy oil elsewhere, Brazil for example. Problem is alternative supply tends to run more expensive, especially with the Hormuz risk premium still baked in, which we’ve seen play out in WTI over recent months, with a possible current hedge for diversification of supply from Venezuela, which we wrote about in previous articles.

“Economic Outcast” and “Economic D-Day” could also start weighing on China’s currency situation over the coming months, particularly in FX. China needs USD for trade, financing, and access to the US financial system, but Iran remains a key oil source, so there’s real tension there. Worth watching how the PBoC reacts, and whether we see any fixing, rate implications. Keep an eye on investor and trader sentiment on USDCNY and offshore USDCNH over the coming months, plus renminbi contract pricing, as speculation builds around how Economic D-Day affects countries trading with Iran. How will that new speculation feed into USDCNH given the current macro and geopolitical backdrop?

Another factor here is Asian geopolitics, tension between Japan and China over Taiwan keeps building. Also relevant: China and Japan’s influence over Southeast Asia, where both countries have nearshoring interests for their economies and businesses. Worth watching Asia closely over the coming months from both a macro and geopolitical lens, a lot’s in motion, including the South Korea situation, growing Russia-North Korea cooperation, and tightening ties between Australia and India. Also important is Quad, and Australia’s now officially naming the Quad as a pillar of its Indo-Pacific foreign policy. This geopolitical hedging, layered on top of Economic Outcast, Economic D-Day, and the Middle East conflict, could keep shaping Asian geopolitics in the months ahead.

[Macro Prospect @macroprospect]

Trump says he’s signed the biggest oil deal in world history with Venezuela. Like we’ve been saying all week, if the Middle East situation keeps stabilizing, oil starts getting priced more on supply diversification headlines, which fits with the softer prices we’ve seen lately. That said, this is still a promise about the future, worth tracking actual barrels flowing to the US from South America, and real inventory data, not just speculation. Also worth remembering WTI’s still ultimately hostage to the Middle East conflict, right now, with things de-escalating, oil’s trading off the diversification story, but if things flare back up, that diversification narrative could quickly take a back seat again. For now, market’s probably treating Venezuela more as a hedge against a Middle East geopolitical shock than as the main trade.

Iranian President Pezeshkian says the country will raise gasoline prices, mainly a signal of serious fiscal pressure and fuel shortages inside Iran, not a direct read on export volumes. Could be a negative economic signal for Iran though. Worth remembering over 80% of Iran’s oil exports go to China. As we know, “Economic D-Day” is designed to hit countries doing business with Iran, China might start paying up for pricier oil elsewhere (Brazil, for instance) out of concern over sanctions and shipping logistics. But it’s just as likely China keeps doing everything it can to preserve the Iran trade relationship, which could escalate the US-China trade war even further, moving from semiconductors, to AI, to autos, and now oil. Worth watching CNH over the coming months, especially USDCNH, for signs the US-China conflict is spilling into energy supply.

Iran’s also been cut off from banks in the UAE, “Operation Economic Outcast.” The US shifting from military pressure on Iran to systematically cutting off its financial and economic channels. FinCEN proposed cutting Banque Misr’s UAE branches off from correspondent access to the US financial system. Notable because Dubai had been Iran’s gateway to global financial markets. Confirms the broader message here, entities working against the US risk losing USD access entirely.

Kevin Warsh said in yesterday’s appearance that inflation’s still running too hot, and recent better prints don’t yet show durable improvement.

Worth watching upcoming US data closely, especially inflation and labor market prints, for how much they move the odds of a hike. Next week’s the big one for USD, that’s where most of the volatility and sentiment shifts are likely to come from. Friday’s NFP, unemployment rate, and average hourly earnings are the key ones to watch, plus Thursday’s ISM Services. Overall high odds of real volatility across most of next week’s data for USD, though statistically Friday (and to a lesser extent Thursday) carries the most potential for a real move. Two weeks out, CPI and PPI ahead of the FOMC meeting will matter too. Worth paying attention to positioning and sentiment, what investors and traders are already expecting, since a good print that doesn’t quite clear those elevated expectations could easily trigger a “buy the rumor, sell the fact” reaction.

[Macro Prospect @macroprospect]

More news out of the US that the Strait of Hormuz is fully demined. CENTCOM’s confirmed the international shipping lanes are clear of mines, but actual vessel traffic is staying very low. The average number of ships passing through the Strait keeps dropping. Iran’s saying it won’t let ships from hostile countries through. Insurance costs on tankers are also staying elevated since the risk is still too high. Market needs real confirmation now, an actual pickup in tanker traffic through the Strait, before the case for further WTI downside can really hold up long-term.

Also worth watching for oil: the escort question in Hormuz. The US has the capability, and has taken action before to enable safer transit, but there’s no solid confirmation right now that the Navy’s running regular convoy escorts through the Strait.

Also in play: continued plans to diversify US oil supply from Venezuela. Like we said last week, if the Middle East situation keeps stabilizing, WTI could start pricing in more of that US energy diversification story out of South America and Canada. Canada’s tricky for now given the tariffs, but Venezuelan supply could keep climbing in a fairly linear way. That’s a real factor, and probably part of why alongside the US-Iran-Oman talks oil’s drifting lower even as Hormuz traffic stays reduced. There’s also speculation Venezuela’s considering leaving OPEC, which could meaningfully boost its oil sales and output long-term. So basically what we flagged before, as things stabilize a bit, the market’s starting to price in that supply diversification. Still worth watching Middle East headlines though, since any escalation news could shake up oil fast, especially with the narrative building that the US doesn’t want the June-style deal with Iran.

RBC’s view: current tariffs are too limited to seriously dent the Canadian economy.

That said, worth remembering heavy tariffs could also push Canadian inflation higher. Worth watching Canadian inflation data over the coming weeks, it could fuel more speculation and shift sentiment around the rate decision given the ongoing trade conflict. Middle East headlines stay relevant too, given how much oil-moving news is out there, which could keep USDCAD volatile today and into next week. Also worth watching today’s Canadian GDP print and Warsh’s Fed appearance.

[Macro Prospect @macroprospect]

North Korea says it’ll respond forcefully to hostile actions — this after the US approved roughly $125m in arms sales to South Korea. Negative headline for South Korea, but KOSPI isn’t pricing this as serious escalation — Asia’s actually up today. If North Korea does follow through with something concrete, that could trigger real risk-off on the peninsula, but for now this stays in speculation territory.

Another tanker hit in the Strait of Hormuz. Market reaction today is unusually contained, since we’re getting parallel headlines about a possible restoration of shipping through the Strait. Oil’s decline is being supported by the sharp de-escalation we’ve seen all week in the Middle East, plus fresh deals between Gulf states — Oman and Iran among them. Like we called yesterday, oil bounced during yesterday’s European session ahead of the US inventory data, after a heavy sell-off earlier in the week. Since today’s Asia session, shorts are back on in oil. It’s worth keeping an eye on the data at the beginning of the US session for the energy market.

Putin says he’ll escalate the war in Ukraine. Reports suggest Russia’s prepping a bigger wave of attacks on Ukraine after the negotiation impasse.

CIA Director in Moscow for talks on Ukraine, with NATO relations getting increasingly tense. New US intel assessments suggest Moscow may be looking to test NATO cohesion.

Market’s pricing in a limited-provocation scenario — cyberattack, sabotage, border incident — as far more likely than an actual full-scale Russian move into NATO territory. Worth keeping CHF and EUR on the radar over the coming months, though tread carefully here — these are lower-probability scenarios, not confirmed data or events.

US rep Greer floated a US-Canada agreement on aluminum and steel. Traders aren’t buying it as anything beyond political positioning for now — no concrete deal — and you can see that in USD strength against CAD in today’s Asia session. Like we’ve said all week, macro’s been weighing heavily on CAD, visible in the long-covering on USDCAD we’ve seen this week. European session today brings US unemployment data plus Canada’s current account — analysts expect both to lean USDCAD-bearish. Could see some long-unwinding and repositioning on the pair during the European session.

[Macro Prospect @macroprospect]

Iran and Oman are proposing safe passage for ships through the Strait of Hormuz — a genuinely de-escalatory signal for energy markets. Like we flagged in the last piece, oil’s been getting a bit less sensitive to Middle East escalation lately, and this fits that pattern. Good news for energy — looks like the Strait of Hormuz conflict is shifting toward a political-economic fight on both sides rather than a military one. Could give the energy market some breathing room. That said, keep a close eye on sanctions headlines targeting countries doing business with Iran — there could be important stuff there for oil, plus the US-Canada situation.Also bullish for sentiment (bearish for oil): Trump says all mines in the Strait of Hormuz have been cleared, and there’ll be zero tolerance for Iran laying new ones. Another bit of relief for energy.Part of what’s been driving WTI lower over yesterday’s session and today’s Asia session is speculation that Pakistan’s visit to Iran went well for both sides, with talks reportedly touching on reopening the Strait. There’s also chatter that Iranian negotiators want the US back on the Islamabad Memorandum of Understanding, which moved oil pricing even further. Worth remembering though — this is all still a process, and while it’s giving the energy market room to breathe, it’s still promises about the future rather than done deals. Watch for actual agreements rather than speculation, and whether reality ends up disappointing versus what traders are currently pricing in. Also worth noting: Trump’s said the killing of protesters needs to stop, even where there’s no active protesting in Iran — mildly escalatory, but still speculative for now, and the overall volume of talks and cooperation across the Middle East is net positive for energy. US oil inventory data’s out today — analysts expect a much bigger draw than last period, which could trigger short-covering and repositioning in oil, especially given it’s been heavily sold since the start of the week. Wouldn’t be surprised to see position trimming through the European and US sessions.
On the “Economic D-Day” escalation front, China’s saying its cooperation with Iran can’t be challenged. Like we noted before, China’s the single most important economic lifeline for Iran, especially on oil. Could fuel further escalation in the US-China trade war that kicked off in 2018 — the battleground shifting from tech/AI/autos now into commodities. Biggest thing to watch is still the Trump-Xi meeting in the US — that’s likely where we find out which direction this rivalry actually goes. Real sanctions on China’s financial system would be a much bigger FX signal than the current threat, which is still just speculation — actual sanctions could trigger serious risk-off.
Then there’s Turkey, where we’re seeing rising tension between Ankara and Tel Aviv — Turkey doesn’t want to fully cut ties with Iran, which could keep fueling friction between Israel and Turkey.
Canada’s slapping 15-50% tariffs on certain US products. Trump says the US lost an average $60bn a year over the past decade in trade with Canada and that it can’t continue. For the market, this means higher risk of further escalation, especially with additional US tariffs on cars, trucks, and parts set to kick in 2027. Current tariffs only cover about 5% of Canadian exports though, so the direct macro impact is limited for now. CAD’s the most exposed here. Like we’ve said since Saturday’s tone shift, and since Monday’s Asia session, we’ve had CAD shorts running — Canada risk-off. Today’s Asia session is weak for CAD. Yesterday we noted some USDCAD softness ahead of possibly weak USD data — since today’s Asia session, that fear’s being bought back. Resistance still favors USD over CAD, mainly on macro. Worth flagging — Core PCE data’s out today for the US, expected to come in solid per analysts, which could mean real volatility into the print during the European session and possible repositioning on the pair.

[Macro Prospect @macroprospect]

@raewonx Agreed, last week was good and sentiment now shifted quickly over the weekend. Now Canada risk off.

[Macro Prospect @macroprospect]

The US narrative on ramping up economic pressure against countries doing business with Iran keeps deepening. Main players here look like China and Russia. China’s got a heavy trade relationship with Iran, especially on energy. The US-China economic conflict that kicked off back in 2018 could be picking back up after a brief lull. We’ve seen chatter for a while now about pushing to block Chinese AI models from the US market, plus suspending Chinese-made cars sold in the US. This new US narrative on squeezing countries tied to Iran economically could fit right into that broader trend.

Big one to watch: Trump’s meeting with Xi in the US. Could be where we get real clarity on whether this US-China economic conflict keeps escalating, shifts into more of a straightforward rivalry, or plays out in other arenas entirely — or even cools off. Right now it’s looking like a possible return to the sharper rhetoric we saw through 2018-2024. Trump’s been fairly measured with China so far in his second term, but recent developments are edging back toward a more hawkish great-power-rivalry stance — you can see that in the current speculation around an extra 7.5% tariff on Chinese goods. Fits the story we flagged last week about US-China tension tightening back up — question is just how far it goes.

Iran, meanwhile, says it’s got its own plan for an “economic attack” against the US. Real question is whether “economic” ends up meaning economic, or whether this tips back toward military. Iran-Pakistan talks could take some heat off the Middle East from a military standpoint — you could see that in oil today, WTI drifted lower through the session. Does this conflict fully shift into the economic lane? Oil’s still almost directly correlated with the Middle East conflict, though that link might be loosening slightly. Just slightly.

Bessent could deploy up to $1 trillion on bond buybacks. Bonds actually reacted well to this — 10Y dropped toward 4.64-4.70%, 30Y moved lower too. Today’s session showed yields down and the dollar picking up a bit of strength. Confirms what we flagged yesterday — resistance tilting toward USD short-term versus both CAD and EUR.

Trump’s back at it on Canada — announcing 50% tariffs on Canadian auto parts and vehicles starting January 1, 2027. Another headline adding to the new tone that’s been building since Saturday morning. Like we said last week, CAD had been getting strong support, but that flipped since Saturday and macro’s now weighing on the loonie. Today’s post extends that — as we flagged yesterday, investors are now pricing in more risk for Canadian exports and the broader economy. Worth watching for possible short-covering on CAD though, since some investors who piled into shorts after Monday’s risk-off could start booking profits.

Also keep Treasury policy on the radar — any fresh headline there can shake up macro on this pair fast. And tomorrow analysts are expecting a weaker Consumer Confidence print in the US, which could mean some position-trimming in FX or people waiting for confirmation before committing further. Worth remembering CB Confidence is more one piece of the puzzle here than a real standalone driver

[Macro Prospect @macroprospect]

Trump says he wants to end tariffs from Kanada on American agricultural products and that situation is not fair for US. This extends the fight that kicked off Saturday. Carney already confirmed there’s no US-Canada deal on the table, which flipped investor sentiment — and today Trump’s comments just pile more onto that.

Could see real volatility at the Asia open on this. FX is the market to watch here — like we’ve said all week, it’s been backing CAD. But Saturday morning already nudged macro slightly toward USD, and today’s comments from Trump are pushing resistance a bit further in the dollar’s favor.

Still, worth keeping an eye on the Middle East — that’s been giving USD some temporary support, but any fresh de-escalation news could shake things up on this pair fast. New tension between Turkey and Israel could keep things elevated, though we’re hearing Iran’s set to meet Pakistani leadership in Tehran, which could cool things down a bit in the Middle East and especially the Gulf. Iran being open to talks shows the Saudi-Turkey-Pakistan pact was a real move — those countries pushing to rely less on US military backing and lean into their own defense setup, kind of a mini-NATO type thing. That could ease Middle East tension short-term, but still need to watch closely for any fresh US attacks or escalation.

So geopolitics could soften USD a bit near-term, but macro’s starting to favor the dollar. Then there’s oil — lower prices, unlikely as that seems right now, would be another catalyst that could flip the CAD sentiment we’ve seen all week, given how tied Canada’s economy is to commodities.

Key things to watch: does FX gap at the open? And at the Asia open — especially Nikkei — does that gap get filled, or do we get a clean directional move? Those two moments matter most here.

AfD leader says the euro is an unstable currency, and that Germany should exit the eurozone and bring back its own currency. Bearish for EUR, and it lands harder given Germany’s the anchor currency and effectively the ECB’s hub. We’ve been seeing a shift in German politics for a while now — leaning more patriotic, even nationalist, and similar to the current US administration’s path. Possible that German-US cooperation actually tightens further in coming years. Overall backdrop is soft for the euro. Question is whether this is actually significant enough to move price versus rates and valuation.

EUR’s already been under pressure from rate-expectation divergence and energy risk.
After Alice Weidel’s comments, could see a brief sentiment shift, but likely very short-lived — long-term this isn’t much of a catalyst since it’s still speculation, not hard data or anything that actually gets priced into rate or risk expectations.

AfD isn’t in a position right now to unilaterally pull Germany out of the euro — probability of that happening stays low, which limits the real impact on EUR.
Still, worth watching the Asia open — EURUSD could get a bit of breathing room from the US-Canada tariff escalation.

[Macro Prospect @macroprospect]

PM Carney says Canada has suspended trade negotiations with the US. Big deal for the market — Canada’s been pushing for independence from the US, even floated pivoting toward the EU before, and this shows that even bilateral deals won’t shift that trajectory of trying to decouple from the US economically and politically. Talks could still resume and something could still get signed, but this is the first real negative signal that any eventual deal might be fragile, or not shaped the way the US administration wanted. Could shake things up hard come Monday.

Real risk of a sizeable FX gap, especially on CAD — macro’s been backing CAD for days now like we’ve flagged, with USD selling off and the loonie catching a bid. Late Friday trading actually gave USD some support too, on risk-off flows tied to the Middle East war after Iran’s leadership comments. Resistance is starting to shift back in USD’s favor even with Treasury’s buyback still in the background. Macro’s turning more neutral for CAD, with geopolitics now leaning USD’s way.

Worth watching headlines Sunday — they’ll set the tone for Monday’s Asia open. Real gap risk here given the volatility we’ve had in this pair favoring CAD, but we’re now getting the first solid signs of a possible directional shift over the coming days, and that’ll ultimately get confirmed at the Asia index open. Also keep in mind — elevated 10Y/30Y yields and fiscal concerns are still capping USD upside, so even if sentiment shifts from last week, the move might be limited.

If we get Middle East headlines Sunday — especially from Trump — worth remembering: if oil spikes hard Monday on trade escalation or Middle East risk, CAD could get some support back as a commodity currency. And the Middle East backdrop stays tense, with rising political friction between Israel and Turkey. Also some chatter that Syria wants in on the Saudi-Turkey-Pakistan pact.

Watch the Asia open (Nikkei could be a good tell) to get an early read on direction.

[Macro Prospect @macroprospect]

Iran / Middle East
Iranian President Masoud Pezeshkian says Iran wants to end the conflict from a position of strength. Another signal out of the Middle East responding to Trump’s plan for a full economic blockade of Iran — this is the Islamic Republic’s answer to yesterday’s “Economic D-Day” announcement. Iran’s message is mixed: they want to end the conflict (de-escalation), but on kinetic terms (escalation). Basically — Iran feels strong in this standoff with the US and wants out, but only on its own terms. Mixed signal, and that’s exactly how the market’s reading it.
After the headline we saw strong USD buying, which pointed to further risk-off flows into the dollar during wartime — but oil actually sold off first (risk-on for energy), though not enough to hold, since sentiment stayed bid into the close. Basically mirroring Iran’s own message — pulling both ways. Oil contracts are still getting bought, and the overall picture remains the same: WTI is almost entirely dominated by the Middle East situation right now.
Worth watching over the next few days: the mismatch between the US wanting to fight this economically and Iran wanting to fight it kinetically — that gap alone could drive further risk-off. But it’s also possible both sides end up using these different tools to de-escalate rather than escalate, which would be a genuinely big shift. If we get news in the coming days pointing toward any kind of deal — kinetic or economic — that could trigger serious USD selling in FX, and even some relief in commodities. Though that’ll need hard confirmation, not just speculation.
FX / Macro
Limited G10 reaction to the Iran headline. Sharp short-term move that mostly faded back to prior levels across pairs. Slight USD strength, so a mild risk-off tone, but not enough to offset the dollar’s other headwinds — Treasury buybacks and the Canada deal, which kept CAD firm through most of the day. The Middle East headline did trigger a small pullback, with USD ticking up slightly against CAD. Macro still firmly favors CAD over USD, though geopolitics could shift sentiment in the days ahead. That said, the bigger driver for FX right now should stay the Treasury buyback story — that’s what’s weighing most heavily on dollar macro.
Crypto
Another strong day for crypto. Buying continuing across the board.
Other
Word is Anthropic’s IPO could end up bigger than SpaceX’s.
Tesla is recalling vehicles made in China.

[Macro Prospect @macroprospect]

Iran / Middle East

Trump kicking off economic pressure on Iran. Calling it “Economic D-Day” — the goal being full economic, political, and financial isolation of Iran. As we’ve said before, oil stays tied to the Middle East story above everything else. Even supply diversification or better inventory numbers aren’t moving WTI much right now. The market’s pricing geopolitics first — until the Strait of Hormuz situation stabilizes, that’s going to keep driving price action. Trump is pointing to consequences for countries backing Iran. China’s the big one here — they’re Iran’s main oil buyer, and without cutting that flow, Iran can keep functioning economically. Russia’s also in the picture, smaller trade ties than China but a potential enabler for Iran to dodge sanctions and pressure from this D-Day push. On China — worth watching for spillover speculation, since we’ve seen the US-China economic rivalry heating back up over the past few months. The trade war that kicked off in 2018 has resurfaced lately around AI — blocking Chinese firms from parts of the US AI market — and now it’s bleeding into autos too, with Chinese carmakers facing tighter access to the US market. This new Iran pressure campaign could end up as another escalation point in the broader US-China rivalry. That said, worth waiting for more signals — some firms like Nvidia are actually deepening ties with China right now.

Monday’s set to bring a conference on Iran economic pressure. Treasury Secretary Bessent said today the conflict could shift from kinetic to economic — in some sense a rhetorical shift, and a possible mild de-escalation signal, but Iran’s response is what really matters here. Next week should tell us whether Iran goes kinetic or the conflict moves fully into the economic lane — which would be a relief for Gulf states, including the UAE, Qatar, and Saudi Arabia.

Macro

Bessent says the bond buyback could go as high as $4bn. USD reaction was minimal — buybacks are small relative to the overall debt market, and yields partially bounced back afterward anyway.

Yesterday’s FOMC leaves a hike on the table for the dollar if inflation data supports it, but the Middle East situation is dragging resistance lower for USD, especially against CAD. Today’s real surprise was the Philly Fed Manufacturing Index, which blew past expectations and gave a modest boost to rate-hike sentiment — manufacturing activity is now at its highest since April 2021. Fits the broader US reshoring push, but we’ll need more confirming data before getting too excited, since Treasury’s buyback plans are still keeping the dollar on the back foot.

CAD’s in a different spot — supported by Trump’s tariff suspension, plus growing odds of an actual US-Canada economic deal. Middle East tensions and ongoing global concern over oil supply shortfalls are adding further support.

Weak Australian data, combined with a fairly muted USD sell-off from the Treasury buyback and FOMC narrative, made for a soft day for AUD. If Middle East tension keeps supporting USD over the coming days, this mild downside move could continue. That said, odds still favor an RBA hike given inflation remains sticky — which is why today’s AUD/USD dip was fairly contained. Key going forward: watch analyst expectations ahead of the next round of Australian data for a clearer read on sentiment.

Crypto

Trump wants to bring Hyperliquid futures contracts into play. Crypto’s been running hot since yesterday, with heavy buying continuing across the market today.