The USD is mostly lower in relatively light trade on the day so far. Last week’s USD rebound, driven by the solid US NFP report and renewed talk about repatriation of US companies’ retained earnings held overseas, has fizzled as traders continue to focus on low US inflation and doubt the Fed’s ability to deliver further tightening in the next few months caution may prevail ahead of US CPI data at the end of the week.

On the day, the NOK is one of the top-performing G10 currencies, supported by firm crude oil prices, while the NZD is under-performing but virtually flat on the session. The ZAR has firmed ahead of today’s no-confidence vote in President Zuma while the CNY is testing 6.70 for the first time since early Oct

China’s foreign reserves rose for a sixth month in Jul while the trade surplus was reported at +USD46.74bn in the month as export and import growth undershot expectations. The MXN is little changed in a narrow range below its 55- day MA at 18.03. Global stocks are firm, developed market bonds are softer and key short-term spreads are little changed. We think the usual post-NFP market lull may extend a little deeper into the week in the absence of any major data reports until Friday. We remain bearish on the USD broadly but a broader range trade is likely to persist for a while as markets may struggle to advance the USD sell-off meaningfully, with sentiment and positioning having shifted so rapidly in the past few weeks. S.O.

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CAD is quiet, consolidating in a tight range just above Monday’s fresh multi-week low. Domestic rate expectations have softened from their late July highs and OIS are now pricing roughly 20bpts of tightening for the October BoC meeting. The outlook for relative central bank policy remains dominant and the 2Y U.S.-Canada yield spread is steady around 10bpts.

There are no major domestic releases scheduled ahead of the August 18 CPI data. Housing starts (Tuesday) and building permits (Wednesday) are the only releases this week. In terms of sentiment, the net long CAD CFTC positioning has reached a fresh multi-year high with a push to levels last seen in January 2013. E.T.

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