- Pending G-20 meeting provides market distraction today.
- Canadian dollar shrugs off Governor Macklem speech
- US dollar rally takes a breather, CAD underperforms.
USDCAD: open: 1.3664-68, overnight range: 1.3652-1.3690, close 1.3687, WTI $87.28, Gold 1925.27
The Canadian dollar underperformed its peers overnight despite oil prices trading at elevated levels. Traders are continuing to evaluate Bank of Canada Governor Tiff Macklem’s comments from yesterday’s speech in Calgary.
The speech suggested that the days of higher interest rates may have ended after Mr. Macklem said, 'With past interest rate increases still working their way through the economy, monetary policy may be sufficiently restrictive to restore price stability.' That line got a lot of play in the media, but ending the rate hike cycle is far from a done deal. Mr. Macklem said as much when he noted that we are not yet at the point of achieving complete price stability. He continued by saying that previous interest rate adjustments are still making their way through the economy, but should it become necessary to implement additional interest rate increases to achieve price stability, we are fully prepared to take further action.
Looking ahead, Canadian dollar traders are patiently awaiting today’s employment data. Canada is expected to have gained 15,000 jobs in August compared to July’s loss of 6,400 and an increase in the unemployment rate to 5.6% from 5.5%.
As for other currency pairs, EURUSD initially rose from 1.0696 to 1.0728 but then dropped to 1.0700 during early New York trading.
Germany's inflation rate remained at 6.1% year-on-year in August, just a bit lower than July's 6.2%. This was in line with expectations.
Traders are now focusing on next week's ECB meeting, where policymakers are anticipated to keep interest rates unchanged.
Meanwhile, GBPUSD is trading in the range of 1.2465 to 1.2510. Sentiment is bearish due to the recent downgrading of Bank of England rate hike expectations. The expected peak interest rate has fallen from 6.50% in June to 5.60%, which has dampened demand for GBPUSD.
USDJPY moved within the range of 146.246 to 147.29 as traders reacted to weaker-than-expected Q2 GDP figures (actual 4.8% vs. forecast 5.5%, compared to 6.0% in Q1). Additionally, traders are keeping an eye on concerns about potential BoJ intervention and the steady increase in US Treasury yields. There is an escalating fear of intervention as USDJPY continues to gain ground.
AUDUSD traded in a range of 0.6368 to 0.6415, with gains being limited by deteriorating risk sentiment due to ongoing tensions in the China-US tech dispute and a strong demand for the US dollar.
