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USD / CAD - Canadian dollar steady with FOMC ahead.

- FOMC expected to leave rates unchanged.

- Oil slides as EIA cuts price forecast.

- US dollar consolidating Tuesday losses-trades narrowly overnight.

USDCAD: open 1.3590-94, overnight range 1.3585-1.3609, close 1.3590, WTI $68.73, Gold, $1983.54.

The Canadian dollar is struggling to make headway against a backdrop of weaker oil prices and a resilient US dollar. Yesterday's attempted Canadian dollar rally was thwarted after the release of the US inflation report for November.

Headline November US CPI was an as-expected 3.1% y/y, and a tad below the 3.2% y/y seen in October. That is good news, but the pace of the decline was disappointing. What was worse was that Core-CPI ticked higher to 0.3% m/m from 0.2% in October. The year-over-year result was unchanged at 4.0%.

The results support Fed Chair Jerome Powell’s earlier comments that “there was still lots of work to do” to get inflation down to the 2.0% target.

We will hear more about that today. The FOMC is universally expected to leave rates unchanged. The focus will be on the news Summary of Projections (SEP), specifically the dot-plot projections. They are anticipated to forecast the rate cut by late spring. Mr. Powell is expected to push back against market pricing of 100 bps of rate cuts in 2024.

The Canadian dollar is not getting any benefit from oil prices. West Texas Intermediate continues to slide, falling from an overnight peak of $68.92/barrel to $67.72/b despite the American Petroleum Institute (API) weekly crude stocks data showing a 2.3 million barrel drop in inventories. That is partly because the Energy Information Administration chopped their Brent forecast to $73.00/b from $83.00/b in 2024 due to concerns about demand.

EURUSD is drifting in a 1.0773-1.0800 range after weaker than expected Industrial Production (actual -0.7% vs. September -0.1% m/m).
GBPUSD traded with a bearish bias in a 1.2509-1.2574 range. JPMorgan and Goldman Sachs lowered UK GDP growth forecasts to 0.5% from 0.6% following weak UK data. GDP fell 0.3% (forecast -0.1%) and Industrial Production fell 0.8% m/m from 0% previously.

USDJPY churned in a 144.74-146.19 band, partly because the Tankan survey showed Business confidence at large Japanese manufacturers rose to a twenty-four month peak.

AUDUSD bounced in a 0.6542-0.6568 band with gains limited by disappointment that China did not announce any fiscal new stimulus actions.