– Canadian economic growth expected to be flat in August.
– US data will be overshadowed by upcoming election.
– US dollar opens mixed, but little changed from yesterday./
USDCAD: open 1.3920, overnight range 1.3899-1.3922, close 1.3904, WTI $68.86, Gold, $2777.81
The Canadian dollar is starting today’s session little changed from yesterday and that is despite more dovish comments from Bank of Canada Governor Tiff Macklem and robust US economic data.
Governor Macklem testified before the Senate Banking Committee yesterday. His remarks were nearly identical to what he said to the House committee on Tuesday. However, he didn’t just open the door to another 50 bp rate cut, he kicked it off its hinges.
Mr Macklem said, “We’re taking it one meeting at a time. We’ve demonstrated we’re prepared to do a 50-basis-points cut if we think that’s appropriate. And if we think it’s appropriate to do it again, we’ll do it again.” He justified his comments with “We’ve been pretty clear that we anticipate lowering them (rates) further, unless we’re surprised by economic developments.” The governor suggested the economy needed lower rates to help improve its poor productivity performance and pointed out that interprovincial trade barriers exacerbated the productivity problem.
Those comments occurred against the back drop of strong US jobs gains reported by ADP and by another robust US GDP report. Both data points suggest that the Fed is right not to rush rate cuts, which underpinned the US dollar.
EURUSD is near the peak of its 1.0844-1.0876 band after a jump in Eurozone inflation numbers. , HiCP inflation surged to 2.0% year-over-year, up from 1.7% in September and surpassing the forecast of 1.9%. The result reduced the odds for a 50 basis point rate cut by the European Central Bank on November 14. Germany retail sales rose 3.8% y/y, compared to 2.1% in September which also supported prices.
GBPUSD rallied in a 1.2944-1.2999 range as traders process the latest UK budget focused on taxation and spending. The currency pair was choppy in a 1.2936 to 1.3034 yesterday, following Chancellor Rachel Reeves’ announcement of plans to generate £40 billion in new tax revenue while increasing borrowing by altering the measurement of government debt. This announcement has made gilt traders uneasy, resulting in a decline in the 10-year Gilt yield from 4.839% yesterday to 4.3227% today.
USD/JPY dropped in a 151.93-153.59 band after the Bank of Japan chose to keep its interest rates unchanged. Governor Ueda has stated his intention to raise rates in the future. Prices rebounded to 152.72 in the New York session, driven by caution ahead of the US elections and ongoing political concerns in Japan.
AUDUSD dropped from 0.6580 to 0.6561 because of weaker-than-expected Australian retail sales, which rose by only 0.1%, (forecast 3%).
