- Sterling rally sparks wide-spread US dollar selling
- BoC meeting today, Quarterly Monetary Policy Report released
- US dollar opens sharply lower, AUD outperforms
USDCAD snapshot open 1.3553-57, overnight range 1.3510-1.3637, close 1.3607, WTI $85.87, Gold $1669.84
The Canadian dollar rallied in the wake of a broad US dollar selling frenzy that helped propel the Australian dollar to a 2.55% gain since yesterday morning.
The US dollar troubles began in Europe without a clear catalyst for the stampede to sell the greenback. One school of thought is that the massive squeeze on short-sterling positions which triggered a series of stop-loss orders sparked similar moves across the G-10 spectrum. The selling pressures were exacerbated by the recent Bank of Japan intervention to sell USDJPY.
US dollar bears were also empowered by the steep drop in the US 10-year Treasury yield which fell from 4.32% last Friday to 4.02% overnight. Bullish bond traders may be nervous due to speculation the Fed is considering a pause to its rate hiking agenda.
Its meeting day for the Governing council of the Bank of Canada. They have boosted Canadian interest rates by 300 bps this year and are widely expected to add another 75 bps to the total. That is unless the bow to political pressure from all camps complaining the rate increases are causing consumer’s pain.
That should be unlikely especially considering that the latest Business Outlook Survey suggested inflation pressures were still very hot. CPI has retreated from its peak level, but it is still far above the BoC’s target of 2.0%.
EURUSD traded in a 0.9944-1.0047 range despite no major Eurozone data and ahead of tomorrow’s ECB monetary policy meeting. The ECB is expected to raise rates by 75 bps and warn that risks are to the downside.
GBPUSD is on a tear and has been since touching 1.1060 on Friday. Prices rallied to 1.1619 overnight before retreating to 1.1565 in NY, in a stop-loss fueled stampede. The GBPUSD downtrend from February is intact below 1.1660.
USDJPY was feeling the effects of the BoJ intervention and traded defensively in a 146.72-148.41 range with the slide in the US 10-year yield to 4.06% weighing on prices. The BoJ monetary policy meeting is Friday.
AUDUSD rallied from the opening bell in Sydney, rising from 0.6374 to 0.6496. Hotter than expected Q3 inflation (actual 7.3% y/y vs forecast 7.0%) fueled the gains after economists upgraded their November 1, RBA rate hike forecast to 0.50% from 0.25%.
Today’s US data is second-tier and includes Wholesale Inventories and New Home Sales.
