The dollar's gains have extended today in a risk-off environment, with unwinding of carry positions making the Japanese yen and Swiss franc firmer. The dollar has stabilized in late European morning turnover. The Bank of Canada is widely expected to cut rates today, pushing the greenback against CAD1.38, a level it hasn't traded above for three months. Equities are experiencing a poor session, mainly triggered by poor earnings reports. U.S. future indices have dropped sharply, indicating a lower opening. Gold has extended its recovery from yesterday, reaching a three-day high just below $2420. September WTI stabilized after plunging to $76.40 yesterday, marking its lowest level in over a month.

Asia Pacific Markets
Japan's PMI has increased the odds of a rate hike next week. According to the swaps market, the likelihood of a 10 bp hike has risen from about 40% to slightly more than 60%. Upcoming Tokyo CPI data on Friday may also impact sentiment. The dollar settled at its weakest level against the yen since early June, despite a softer 10-year Treasury yield. Continued selling today drove the greenback to almost JPY154.35, its lowest level since May 16.
The Australian dollar has fallen for seven consecutive sessions, the longest losing streak since last August when it had eight consecutive declines.

European Markets
The euro entered the initial target area of ~$1.0840-50 yesterday, falling to almost $1.0825 so far today. Although U.S. rates have not risen, the U.S. two-year premium over Germany increased by the most since early June yesterday (~8 bp) and reached its highest level in nearly three weeks (~180 bp).
Sterling pushed through $1.29 yesterday for the first time in eight sessions. After hitting a low slightly below $1.2890, it has struggled to recover above $1.2920, spending little time above $1.2910 today.

American Markets
U.S. inventory and goods trade data are crucial for economists fine-tuning forecasts for tomorrow's initial estimate of Q2 GDP.
The highlight of the day is the Bank of Canada meeting. The market has been confident (80%+) of a rate cut for more than a week, anticipating the second consecutive cut. Yesterday, the greenback consolidated mostly between CAD1.3750 and about CAD1.3785, posting its highest close since the end of April. The risk is on the upside if the Bank of Canada does not counter the dovish expectations reflected in the spot market.