Today
Futures are mixed this morning while U.S. treasuries are holding onto gains, hovering around 4.01% as of the time of writing. It’s decision day for both the Bank of Canada and the Federal Reserve, with markets expecting quarter-point cuts from each. The BoC already eased twice this year in January and March, before holding steady through three meetings, while the Fed has remained on the sidelines, constrained by stickier U.S. inflation and earlier resilience in growth. A move from both today would signal a shift toward easier policy, which could create conditions for lower yields and a softer U.S. dollar, though the reaction will depend heavily on guidance (which may be complicated given succession plans for Powell) and incoming data, and the cuts also highlight concerns about slowing growth that may temper investor enthusiasm.
In Canada, the latest inflation report added weight to expectations for further easing. Headline CPI rose 1.9% in August from a year earlier, up from 1.7% in July but slightly below forecasts. The increase was driven largely by gasoline, which fell less than the prior month, while most underlying measures continued to moderate. Shelter inflation eased to 2.6%, and CPI excluding food and energy also decelerated to 2.4%. The Bank of Canada’s two preferred core measures averaged 3.05% in August, down from 3.1% in July, while the three-month moving average still trending lower. On a monthly basis, CPI fell 0.1%. With the economy showing signs of slack, including two months of job losses and a 1.6% annualized GDP contraction in the second quarter, policymakers appear to have the data they need to resume easing. Markets will now be focused on how policymakers frame the outlook, which will shape whether today’s moves are seen as the start of a broader easing cycle or a more cautious step.
Shoppers are still showing up. U.S. retail sales rose 0.6% in August, beating forecasts and marking a third straight monthly gain, with nine of 13 categories advancing on strength from online shopping, clothing, and sporting goods tied to back-to-school demand. Excluding autos, sales were up 0.7%, while the control group that feeds into GDP also climbed 0.7%. Because this measure strips out volatile components such as autos, gas, food services, and building materials, it offers a clearer read on core goods spending and points to a potentially solid third quarter. The data show consumers remain resilient despite tariffs, subdued sentiment, and a cooling labor market, helped by wages still outpacing inflation and wealth effects from rising stocks. The report highlights consumer resilience but also the Fed’s balancing act, with policymakers expected to cut rates today to cushion labor market weakness and broader growth risks.
Staying with spending, U.S. consumer resilience is increasingly being carried by the top of the income distribution. Bloomberg reported the wealthiest 10% of Americans now account for nearly half of all consumer spending, the highest share on record, according to Moody’s Analytics. Their spending has helped underpin growth even as job creation slows, debt delinquencies climb, and inflation pressures lower- and middle-income households. Economists caution that such reliance on affluent consumers makes the expansion fragile, with stock market performance and asset values playing an outsized role in sustaining demand. A downturn in equities or a shift in sentiment among high-income households could therefore quickly ripple through the broader economy.
Let’s get ready to rumble. Canada, the U.S. and Mexico are beginning formal consultations ahead of the 2026 review of NAFTA, USMCA, CUSMA. Over the coming months, the three governments will assess how the deal has performed since it took effect in 2020, covering nearly $2 trillion in annual trade. Canada is expected to hold industry consultations later this fall while Mexico will publish guidelines this week to solicit public comments, and the U.S. Trade Representative has launched its own consultation process. The evaluation will shape negotiations on whether to extend the pact beyond its initial term in 2026, a process that could be contentious given Trump’s push on beautiful tariffs and his administration’s more combative trade stance. For Canada and Mexico, CUSMA remains a critical anchor, shielding much of the two countries’ trade from Washington’s recent tariff actions even as tensions with the U.S. rise.
Pomp and circumstance. The U.K. is rolling out an elaborate royal welcome for Trump over the next two days, with King Charles, the Prince and Princess of Wales (Harry and Meghan will not be present), and a thousand-plus soldiers hosting him at Windsor Castle in a show of pomp aimed at securing diplomatic goodwill. Trump, the first U.S. president to receive two full state visits, has expressed admiration for the royal family, and Prime Minister Keir Starmer hopes the pageantry will help ease any tensions on trade and security talks. The visit will feature a horse-drawn carriage procession, banquets, and meetings with senior royals, showing how Britain is not shy about leveraging its monarchy as soft power even as its global influence wanes. While the government seeks closer U.S. cooperation in tech, finance, and energy, potential flashpoints remain over foreign policy challenges such as the war in Ukraine, and polls suggest the lavish treatment of Trump is at odds with U.K. public opinion.
Diversion: Can’t even imagine walking up this.
