- Treasury yields plunge and risk sentiment soars.
- US PCE data will be key today.
- US dollar starts the day with losses across the board.
USDCAD: open: 1.3423-27, overnight range: 1.3417-1.3507, close 1.3487, WTI $92.19, Gold, $1873.4.
The Canadian dollar staged an impressive rally yesterday and then added to its gains overnight. Unfortunately, the rally did not have anything to do with domestic influences but was on the back of broad-based US dollar selling as the US 10-year Treasury yield fell.
The 10-year Treasury yield dropped to 4.56% in early trading today, well below yesterday’s 4.64% top. Falling Treasury yields sparked a rally on Wall Street and the S&P 500 closed with a 0.59% However, the index is still down 4.61% in September as of yesterday’s close.
The US government is teetering on the brink of another shutdown, a development that surprises no one, as Republicans and Democrats can rarely agree on what day it is.
EURUSD saw an uptick to 1.0617 from 1.0558, owing to a weakening US dollar and Eurozone inflation that came in lower than anticipated. HICP dropped to 4.3% year-on-year in September, below the forecasted 4.5%, compared to August's 5.2%. This positive development countered the negative sentiment arising from weaker-than-expected German retail sales, which dropped 1.2% m/m compared to the 0.5%. expected.
GBPUSD traded in a 1.2197 and 1.2272 band, after Q2 GDP rose to 0.6% y/y, up from the previous 0.4%. Additionally, GBPUSD has gained support from the widespread selling pressure on the US dollar.
USDJPY declined from 149.51 to 148.53 due to falling US Treasury yields. The Bank of Japan (BoJ) intervened by purchasing bonds to curb the rise in JGB yields, which reached 1.73% yesterday, the highest level since 2013. Japanese data presented a mixed picture, with August Retail Trade rising by 7.0% y/y exceeding the forecasted 6.6%, while Industrial Production contracted by 3.8% compared to the previous -2.3%.
AUDUSD rallied in a 0.6420 to 0.6502 range, due to higher commodity prices and US dollar weakness. The RBA is widely expected to leave monetary policy unchanged on Tuesday. Australia is closed for Labor Day on Monday.
Today's US data releases include PCE, Wholesale Inventories, the Chicago Purchasing Managers Survey, and Michigan Consumer Sentiment and Consumer Inflation Expectations reports.
