- US politics distracts but has little impact on FX
- China surprises with rate cuts.
- US dollar trading with a mild bid.
USDCAD: open 1.3744, overnight range 1.3701-1.3748, close 1.3727, WTI $78.52, Gold, $2404.85
The Canadian dollar traded lower throughout the overnight session due to a bout of risk aversion and falling oil prices. US presidential politics provided an entertaining distraction but ultimately had little lasting impact on FX markets.
West Texas Intermediate (WTI) is under pressure, and prices have dropped from Thursday’s peak of $82.20/barrel to a low of $78.19/barrel overnight. The plunge occurred despite the 4.87 million barrel drop in US crude inventories, as traders are concerned about heightened Middle East tensions. Israel has added Yemen to its list of targets, which increases the risk of a region-wide conflict. Additionally, wildfires in Alberta threaten to remove about 430,000 barrels of crude shipments from world markets. Nevertheless, traders are far more concerned about supply imbalances than the never-ending Middle East grief. Morgan Stanley analysts are forecasting Brent (the European crude benchmark price) to trade in the “mid to high $70s/barrel” in 2025 due to sharply lower demand from China and increased OPEC (and friends) production.
President Joe Biden ended his re-election campaign over the weekend. There are not any notable US or Canadian economic reports released today. Canadian dollar traders are looking ahead to Wednesday’s Bank of Canada policy statement and quarterly Monetary Policy Report. However, the most important data is the US Core PCE Price index data, which comes out on Friday.
EURUSD is trading in a 1.0879-1.0903 band. The ECB claimed it is focused on incoming data, which may lead to some price volatility when PMI data is released on Wednesday.
GBPUSD is choppy in a 1.2910-1.2940 range. Sterling is underpinned by expectations for just two rate cuts in 2025 due to sticky inflation readings, which are weighing on EURGBP.
USDJPY is in the middle of its 156.28-157.62 range. A shift to safe-haven demand from risk aversion and fear of BoJ intervention is putting downward pressure on prices, while a tick up in the US 10-year Treasury yield to 4.222% from 4.165% on Friday is providing support.
AUDUSD is uninspired in a 0.6661-0.6703 range and trading defensively due to soft commodity prices and weak Chinese growth.
