- Global risk sentiment improves lifting commodity bloc currencies
- RBA raises rates by 0.25% as expected
- US dollar opens lower, giving back some of Monday’s gains
USDCAD snapshot open 1.3549-53, overnight range 1.3544-1.3624, close 1.3623, WTI $87.70, Gold $1650.62
The Canadian dollar and November agree with each other so far, but the month has just started.
USDCAD gave back all yesterday’s gains and then some, falling from 1.3685 Monday morning to 1.3536 today, due to improved risk sentiment, higher commodity prices, and ongoing speculation that the Fed will slow the pace of interest rate hikes.
The Canadian dollar is getting a minor boost from the rebound in West Texas Intermediate (WTI) oil prices from last week’s low of $82.70/b but remain below the peak of $89.70 on October 28. That’s because traders are not very convinced that the Opec production cuts, which take effect today, will be enough to offset reduced demand from a slowing global economy.
Last month Opec announced it would cut production by 2 .0 million barrels/day. However, the actual production cut is around 1.2 million b/pd because the cartel cannot produce as much oil as its quotas allow.
The idea that the major central banks will slow the pace of rate hikes to avoid driving the global economy into a recession got more traction overnight. The Reserve Bank of Australia raised interest rates by 25 bps despite a surge in inflation that would have justified a 50-bps bump.
However, the Fed does not have a mandate to manage the global economy. Its dual mandate, of pursuing maximum employment and price stability is for the American economy.
The Fed is universally expected to raise rates 75 bps on Wednesday and with US inflation at 8.2% in September, it is hard to believe the FOMC will announce a slowdown in the pace of increases.
Asia equity markets started the new month with a rally, led by a 5.23% surge in Hong Kong’s Hang Seng index. That jump was due in part to news that covid restrictions in many areas of China were being eased.
European equity markets are trading in positive territory although volumes are lower than usual due to All Saints holidays in many centers.
EURUSD traded quietly in a 0.9882-0.9447 range with many centers closed due to holidays.
GBPUSD traded in a 1.1466 to 1.1551 band. Gains are capped ahead of Thursday’s Bank of England meeting.
USDJPY traded lower in a 147.00-148.82 range due to a drop in the US 10-year Treasury yield.
US ISM Manufacturing and JOLTS data are on tap.
AUDUSD traded in a 0.6397-0.6448 range. The RBA raised rates 25 bps as expected. NZDUSD rallied alongside AUDUSD.
