Investors Eye Warsh's Words for Rate Clues — Market Talk

0948 ET - Treasury yields and the dollar are largely flat ahead of Fed Chairman Kevin Warsh's speech in Jackson Hole. Investors hope that the usually tight-lipped Warsh will give signals on his near-term expectations for rates and inflation. UBS says its base case remains that incoming data should confirm inflation is gradually easing. This should allow the Fed "to keep interest rates unchanged for the rest of this year before lower inflation opens the door to potential rate cuts in the first half of 2027," says Ulrike Hoffmann-Burchardi, CIO Americas and Global Head of Equities. The 10-year yield is at 4.68% versus Thursday's settle of 4.67%. The two-year yield is 4.24% versus 4.23% Thursday. ([email protected])0938 ET - Canada's robust 3.3% annualized GDP gain was even stronger than the headline suggests, says Ariane Curtis of Capital Economics. Growth was broad-based, she says, noting net trade led the charge, followed by household consumption, business investment and government outlays. A sizable drawdown in inventories prevented growth from matching or surpassing market expectations for a 3.5% gain. But there are two reasons for caution, the economist adds. First, fresh headwinds coming from US tariffs; and a reversal of gains in some sectors after a temporary World Cup boost. ([email protected]; @paulvieira)0937 ET - Bitcoin has reclaimed $80,000, which XS.com's Simon-Peter Massabni says is an important psychological level for cryptocurrency traders. The coin is gaining momentum from the Treasury's recent interventions in the bond market and a strengthening regulatory outlook for cryptocurrencies, Massabni says. A significant portion of Bitcoin's recent advance has been linked to the "debasement trade," in which investors gain more exposure to alternative assets due to concerns about weakened purchasing power from traditional currencies, he says. Some investors have interpreted the Treasury's recent push to ease yields could depreciate the U.S. dollar, Massabni says. ([email protected])0928 ET - The 3.3% growth in Canadian gross domestic product for the second quarter is much stronger than the 2.5% expansion most recently forecast by the Bank of Canada. Yet it may not be enough to budge central bankers next week, when they next decide on monetary policy. The growth marks a sharp acceleration from the first quarter and a rebound from the contraction in the final quarter of last year, buoyed by higher exports, household spending and business investment. Still, inflation worries persist given oil prices remain elevated, and uncertainty over trade remains high. On top of that, the third quarter may be off to a sluggish start. GDP rose 0.3% on-month in June, a third consecutive monthly increase, but Statistics Canada's advance look at July indicates GDP was little changed. ([email protected]; @RobbMStewart)0927 ET - The Bank of Canada next week is likely to acknowledge the strength in the economy prior to the rise in economic tensions between the U.S. and Canada — but that will mean little given fresh layer of uncertainty now hovering over the country's businesses, says Karl Schamotta, chief market strategist at global-payments firm Corpay. Canada GDP rose 3.3% annualized in 2Q, or well above the BOC's 2.5% forecast. In the past week, though, the U.S. has imposed a 50% tariff on certain Canadian imports, and Canada has responded with retaliatory tariffs of their own. Schamotta says the Canadian dollar is trading flat following the 2Q performance, and the currency remains vulnerable "to a dovish repricing of the BOC's policy trajectory." BOC issues its next decision this coming Wednesday. ([email protected]; @paulvieira)0919 ET - Canada had impressive economic growth in 2Q, but that will be yesterday's news as far as the Bank of Canada is concerned, says Andrew Grantham, economist at CIBC Capital Markets. The sharp escalation in trade tensions between the U.S. and Canada hangs over the economic outlook, and Grantham adds the monthly GDP data suggest activity slowed in July. The 3.3% annualized gain in GDP suggests a slightly narrower output gap, or the measure of slack in the economy. Still, the Statistics Canada estimate of flat growth in July has GDP tracking toward a slower 1.5% rise in 3Q, and Grantham says CIBC does not expect the BOC "to move off the sidelines anytime soon." ([email protected]; @paulvieira)0918 ET - Statistics Canada's GDP report for 2Q shows an economy booming just before an escalation of trade tensions. Overall, 2Q GDP grew 3.3% annualized, below market expectations but well ahead of the Bank of Canada's previous estimate. The data agency notes GDP growth would have been higher were it not for a sizable drag on inventories. The change in inventories stripped off 1.3-percentage-points from 2Q growth. Policymakers will likely be encouraged to see business investment rise in 2Q, or the first increase in five quarters. And final domestic demand — which incorporates buying by households, business and government, excluding net exports and inventories — jumped 3.9%, or the biggest increase in at least a year. ([email protected]; @paulvieira)0906 ET - The Canadian dollar is the biggest loser among G-10 currencies this week, hit by the trade war dispute between the U.S. and Canada, Bannockburn Capital Markets' Marc Chandler says in a note. Down about 0.65%, it is "the heaviest [loser] of the G-10 currencies this week," he says. The Australian dollar stands out as the strongest gainer, having risen about 0.40%, encouraged by the swing in sentiment toward another interest-rate hike this year, Chandler says. ([email protected])0905 ET - Canada's technical recession evaporated with data revisions. The economy expanded a solid 3.3% at annual rates in the second quarter. That was slightly softer than the nearly 3.5% expansion economists expected, but comes after gross domestic product for the first quarter was revised upward. Now Statistics Canada calculates the economy grew 0.3% annualized in 1Q, rather than theslight 0.1% contraction it previously estimated following a 1% drop in GDP in the last quarter of 2025. Back-to-back quarterly contractions can define a technical recession. ([email protected]; @RobbMStewart)0856 ET - Canadian economist David Rosenberg reckons that President Trump's decision to escalate trade tensions between Ottawa and Washington by issuing an executive order to rename Lake Ontario as Lake America could add further weakness to the U.S. dollar. "This childish behavior out of the White House is yet another reason to adopt a dire view of the U.S. dollar," says Rosenberg, head of market-strategy firm Rosenberg Research. "Even reserve currencies require global investor confidence. And it is being lost," says Rosenberg, citing the trade conflict with Canada and the war in Iran. ([email protected]; @paulvieira)0823 ET - Yields on U.K. government bonds, or gilts, climb further as markets wait for Federal Reserve Chairman Kevin Warsh's speech at the Jackson Hole symposium at 1400 GMT. "We think it is unlikely we will hear much about interest rates from the Fed Chair, given his stated desire to eschew forward guidance," RBC BlueBay Asset Management's Mark Dowding says in a note. Ten-year gilt yields climb 3.2 basis points to last trade at 5.059%, Tradeweb data show. ([email protected])0749 ET - Investors who expect bond yields to rise are likely to retain the upper hand over the next three-to-six months, even as the U.S. Treasury's decision to increase long-end bond buybacks has tamed these so-called bond bears for now, LBBW's Elmar Voelker says. "We strongly doubt that interventions by the U.S. Treasury Department will permanently prevent a further rise in the term premiums for long-term government bonds," the senior fixed income analyst says in a note. Holding back term premiums lastingly requires a credible shift in U.S. fiscal policy toward consolidation, he says. Only when investors are sufficiently convinced that there is no longer a good reason to fear further monetary tightening measures by major central banks is sentiment likely to shift more sustainably in a bond-friendly direction, he says. ([email protected])