- Risk aversion worsens due to Russian aggression and Chinese data
- Bank of England expands gilt support program
- US dollar opens sharply higher since Friday, AUD is the worst performing G-10 currency
USDCAD snapshot: open 1.3841-45, Fri-Tues range 1.3703-1.3853, Oct 7 close 1.3734, WTI $88.78, Gold $1662.59
The Canadian dollar made a new 2022 low overnight as another wave of negative risk sentiment washed over markets, thanks to Russia.
The Canadian dollar did not benefit from Friday’s employment report. Canada gained 21,100 new jobs which very close to the consensus estimate. The details were poor as most of the gains came from education. Traders ignored the Canadian data and focused on the US nonfarm payrolls (NFP) report.
NFP rose 263,000 in September, which was a tad higher than forecast and high enough to throw water on any “Fed-Pivot” speculation.
The NFP news gave the US dollar a bid which continued on Monday and overnight. Ukraine badly damaged the only Russian bridge linking Russia to Crimea, and Russia responded with a barrage of missiles targeting civilians.
Western leaders were outraged and flapped their gums aggressively while avoiding any concrete action.
On Monday, Fed Deputy Chair Lael Brainard warned “Monetary policy will be restrictive for some time to ensure that inflation moves back to target over time. It will take time for the cumulative effect of tighter monetary policy to work through the economy broadly and to bring inflation down.
Chicago Fed President Charles Evans said “"We're headed for this four and a half percent-ish federal funds rate by March...We are going to put a lot of restrictiveness in place no matter what the data comes in at, unless there was really a lot in the next two months. There's not enough time for that."
Weaker than expected Chinese Services PMI data exacerbated negative risk sentiment in Asia helping the Australian dollar lose 2.5% and making it the worst performing G-10 currency since Fridays open.
EURUSD bounced in a 0.9671-0.9724 range since Friday’s NY close. Russian aggression and talk of a German support for a plan for a joint EU debt issuance (since denied) to help alleviate the energy crisis roiled markets.
GBPUSD chopped about in a 1.1000-1.1107 range. The announced, “it will widen its gilt purchase operations to include index linked gilts.” The UK employment data was not a factor.
USDJPY traders traded in a 145.51-145.85 range due to higher US Treasury yields, but gains were limited due to the threat of BoJ intervention.
The US data calendar is empty.
