- WTI climbs with falling US crude inventories
- Hopes Omicron is less severe than Delta improves risk tone
- US dollar opens softer; safe-haven currencies underperform
USDCAD Snapshot: Open 1.2905-09, Overnight Range 1.2905-1.2922, Previous close 1.2913, WTI open $71.61, Gold open $1790.24
The Canadian dollar is treading water in thin, holiday markets. Traders are looking ahead to Christmas and many corporations, hedge funds, and institutions have closed their books for the year. FX liquidity is poor which may lead to wild price swings.
Asia equity indexes closed modestly higher and European bourses are trading with small gains. Wall Street futures suggest a positive open today. Oil prices are higher while gold is lower compared to Tuesday’s NY open. The 10-year US Treasury yield climbed from 1.45% in Asia to 1.476% today.
Risk sentiment is mildly positive in part due to a belief that the Omicron variant, while highly transmittable, is less severe than the Delta variant. However, large scale business closures, reduced gathering rules, and travel restrictions in many regions suggests that health authorities do not agree.
Markets are also hoping that there is still life in President Biden’s Build Back Better stimulus plan. There are reports that Senator Joe Manchin may be swayed to change his opposition in return for some concessions. Even so, the plan will not reach the Senate until sometime in January.
EURUSD popped from 1.1265 to 1.1310 in NY trading, helped by somewhat hawkish comments from ECB board member Isabel Schnabel who suggested that inflation may not fall as far, or as fast as other ECB members believe. EURUSD needs to break above 1.1380 to break its one-month trading band.
GBPUSD rallied from 1.3242-1.3320 and is bumping up against the downtrend line from October 26. UK GDP data was mixed. Q3 growth was 1.1% q/q compared to the forecast of 1.3% q/q while the year over year results were a tad higher, rising 6.8% y/y compared to 6.6% expected. Even better, for some, the ONS revised the 2020 GDP rate to -9.4% from -9.7%. A break above 1.3330 targets 1.3380.
USDJPY rallied to 114.33 from 113.96 primarily due to the higher US 10-year Treasury yield, which rose to 1.479% from 1.45%.
AUDUSD and NZDUSD are trading as session highs due to broad-based, but mild US dollar weakness
Today’s US data includes Chicago Fed National Activity Index, GDP, Consumer Confidence, Existing Home Sales, and Personal Consumption-Expenditures.
