USD is firmer near this week’s high and still within a tight trading range. Tariff headlines and EU/UK PMI data generated modest FX volatility. Yesterday, US President Donald Trump terminated all trade negotiations with Canada over Ontario’s advertising campaign critical of the White House's tariffs. USD/CAD jumped as much as 0.25% on the news to an overnight high at 1.4028, with key resistance offered at 1.4080 (October 14 high), BBH FX analysts report.

USD downtrend intact despite near-term firmness

"US September CPI (1:30pm London, 8:30am New York) and October PMI (2:45pm London, 9:45am New York) take the spotlight today. The final October University of Michigan sentiment index (3:00pm London, 10:00am New York) and Kansas City Fed service index an hour later will play second-fiddle."

"US private sector growth momentum is projected to ease slightly in October. The composite PMI is expected to dip to a four-month low at 53.5 vs. 53.9 in September driven by slower services sector activity. US inflation is expected to remain sticky in September. Headline CPI is seen rising 0.4% m/m vs. 0.4% in August to be up 3.1% y/y vs. 2.9% in August. Core CPI is expected to rise 0.3% m/m vs. 0.3% in August to be up 3.1% y/y vs. 3.1% in August. For reference, the Cleveland Fed’s Nowcast model forecasts both headline and core CPI at 3.0% y/y in September."

"Watch-out for super core services CPI (less housing), a good indicator of underlying inflation trends. In August, this measure printed at 3.2% y/y for a second straight month, signaling that progress towards the Fed’s 2% inflation goal is stalling. Nevertheless, upside risks to prices are not martializing and leaves room for the Fed to deliver a follow-up 25bps rate cut next week to a target range of 3.75-4.00%. Moreover, restrictive monetary policy can worsen the already fragile employment backdrop and lead to a further downward adjustment to Fed funds futures. Bottom line: USD fundamental downtrend is intact."