Dollar Slips as Yields Rise, CAD Faces Weekend Tariff Shock

Friday's session closed out the week with the dollar index easing roughly 0.1% to about 98.7-98.8, even as Treasury yields rose across the curve — the 10-year up about 3bp to 4.738% and the 30-year up about 3bp to 5.273%. That's the yield/DXY decoupling that has defined most of August: higher yields failed again to pull the dollar higher, with flows instead going into gold and crypto. Markets were closed Saturday and Sunday, so there's no new session to report; the next print comes at Monday's reopen. The desk's framing is that the yield rise looks like a real-rate story with inflation expectations calm — not the kind of move that typically supports a currency higher.

The curve firmed broadly Friday: 10-year yields rose about 3bp to 4.738% and the 30-year about 3bp to 5.273%. The rally sparked by Treasury Secretary Scott Bessent's buyback pledge on Aug 19-20 has largely fizzled, with the 30-year back up near where it started. Philly Fed's manufacturing index jumped to 47.4, a five-year high, with the six-month-ahead outlook index up 39 points to 73.6, its highest since August 1983 — though price pressures within the survey eased. Jobless claims fell to 206k versus roughly 210k expected.

EUR/USD rose 0.21% to about $1.1703 Friday, a three-month high and fourth straight weekly gain, helped by a Eurozone Composite PMI at 52.1, a nine-month high, and roughly 80-83% market-priced odds of a 25bp ECB hike on September 10 (per market-pricing trackers centralbank.watch and rateprobability.com). GBP/USD eased Friday as UK retail sales retreated, even as the UK composite PMI hit 52.5, its best since April; sterling still touched a multi-month high near 1.364 before paring into the close. USD/JPY was little changed at 158.86 (-0.04%), with Japan's core-core CPI rising to 1.9% y/y, firming the case for a BoJ hike in September. USD/CAD closed at 1.3742, down 0.22%, before the weekend's US-Canada tariff shock.

USD/CAD closed Friday at 1.3742, down 0.22% for a third straight weekly CAD gain, helped by broad dollar softness and firmer crude — WTI settled at $87.06/bbl and Brent at $94.39/bbl after Trump threatened new sanctions on Iran's trading partners, tightening supply expectations. That calm didn't last: on Saturday the US imposed 50% tariffs on roughly $20bn of Canadian goods after trade talks fell. Prime Minister Mark Carney called it 'a miscalculation,' saying US demands were 'uneconomic, unfair, and undermined the net benefits for Canada,' and confirmed Canadian retaliatory tariffs take effect September 8. The Bank of Canada held its rate at 2.25% on July 15, a sixth straight hold; Governor Tiff Macklem flagged US trade policy as a headwind. Tariff escalation is CAD-negative, but crude strength and dollar softness are CAD-supportive — no clear directional edge into Monday's reopen. Next BoC decision is September 2.

Monday, August 24: no major eurozone data scheduled; no confirmed high-impact UK releases; no major scheduled Japan release; no major Statistics Canada releases. Later in the week: Germany's Ifo Business Climate Index (Tuesday, Aug 25), the Fed's Jackson Hole Economic Policy Symposium (Aug 27-29), Japan's Tokyo CPI and July unemployment rate, and Canada's Current Account (Aug 27) and Q2/June GDP (Aug 28). Also watch for headlines on Canada's September 8 retaliatory tariffs and any government response to the new US 50% tariffs on Canadian goods.