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·       The Canadian dollar rallied half a percent against the U.S. dollar on Monday as investors rushed to buy riskier assets after the United States and Canada agreed to update the North American Free Trade Agreement.

Trade tension has dominated currency markets since April, boosting the dollar and pushing down currencies of trade-dependent countries from South Korea to Mexico. The latest news prompted traders to cover some of their extreme short bets.

·       The dollar index rose a fifth of a percent to 95.32, just below a Sept. 10 high of 95.38 in the previous session.

Sentiment was more subdued in the European session. Italian bond yields surged in opening trade on a report the European Commission was set to reject Italy’s budget plans in November and open a procedure against the country’s public accounts in February.

The euro fell a quarter of a percent to $1.15775.

·       U.S. President Donald Trump signed a massive spending bill on Friday, providing hundreds of billions of dollars for the Department of Defense and averting the threat of a federal government shutdown at least until December.

The bill includes $675 billion to fund the Defense Department for the full year ending on Sept. 30, 2019, as well as additional funds for the wars in Afghanistan and elsewhere, and $180 billion for the Labor, Health and Human Services and Education Departments.

It also includes a measure to keep the federal government open until at least Dec. 7, even though Congress has not yet passed full-year appropriations bills covering every department.

·       If the United States soon ends up imposing tariffs on all Chinese imports, the nation’s economic growth would be reduced by up to 0.2 percentage point by the end of 2019, while domestic core inflation would rise by 0.2-0.3 point, J.P. Morgan economists said on Friday.

The tariffs would trim the government’s budget gap to $900 billion from $1 trillion in fiscal 2019, they said in a research note.

The economic impact from duties on an estimated $544 billion worth of Chinese-made products could be greater “if business confidence suffers more than we expect,” they wrote.

On Monday, the Trump administration said it would implement tariffs on an additional $200 billion of Chinese imports on Sept. 24, starting at a 10 percent rate that would grow to 25 percent in 2019.

J.P. Morgan economists forecast U.S. consumers would pay $40 billion more on imports, which is equivalent to 0.2 percentage point of $20 trillion in gross domestic product.

·       It's possible for the Chinese yuan to depreciate by another 10 percent against the dollar if the United States continues to raise tariffs on China imports, independent economist Andy Xie told CNBC on Friday.

A "significant depreciation" of 10 percent is possible if the U.S. follows through with its threat to raise import duties on Chinese goods to 25 percent at the end of this year, said Xie, who was formerly with Morgan Stanley.

"The currency fluctuates reflecting the economic challenges, so when you have tariffs rising on you, the currency adjustment is inevitable," Xie said.

·       The Federal Reserve just keeps on hiking, and it could be setting the U.S. economy up for its next recession, says Peter Boockvar, chief investment officer at Bleakley Advisory Group.

This week, the Fed raised its benchmark interest rate a quarter point, and upgraded its expectations for economic growth for this year and next. However, rising borrowing costs have been faulted by a few observers, including President Donald Trump, who just days ago said he was "not happy" about the central bank's move.

One of those who echoed the president's concerns was Boockvar, who told CNBC's "Futures Now" on Thursday, that 10 of the last 13 rate hike cycles ended in recession.

"We're now getting deeper into the rate hike cycle, and while we all focus on where the fed funds rate is going to be, behind the scenes the Fed continues to shrink their balance sheet," the veteran investor said.

·       China has canceled a security meeting with U.S. Secretary of Defense Jim Mattis that had been planned for October, a senior U.S. official said on Sunday, days after a top Chinese official said there was no reason to panic over tensions between the countries.

·       Factory activity in Asia weakened in September, with many trade- reliant economies seeing a slump in export orders in a sign that escalating U.S.-China tensions are taking a toll on business confidence.

·       Brent crude oil prices rose to their highest since November 2014 on Monday ahead of U.S. sanctions against Iran, the third-largest producer in the Organization of the Petroleum Exporting Countries (OPEC), that kick in next month.

Benchmark Brent crude oil futures LCOc1 rose to as much as $83.32 a barrel on Wednesday and were at $83.09 at 0335 GMT, still 36 cents, or 0.4 percent above their last close.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were up 19 cents, or 0.3 percent, at $73.44 a barrel.

·       In a sign that the financial market is positioning itself for further price rises, hedge funds increased their bullish wagers on U.S. crude in the week to Sept. 25, data from the U.S. Commodity Futures Trading Commission (CFTC) showed on Friday, increasing futures and options positions in New York and London by 3,728 contracts to 346,566 during the period.

In a further sign of the impact that the U.S. sanctions on Iran will have on the market, China’s Sinopec (600028.SS) said it is halving loadings of Iranian crude oil this month. China is the biggest buyer of Iranian oil.

“If Chinese refiners do comply with U.S. sanctions more fully than expected, then the market balance is likely to tighten even more aggressively,” Edward Bell, commodity analyst at Emirates NBD bank wrote in a note published on Sunday.

·       ANZ bank said on Monday that “the market is eyeing oil prices at $100 per barrel”.

·       Trading activity will be low in China this week due to the Golden Week holiday there.