- Risks from UK market turmoil eases
- Wall Street set to open lower
- US dollar rebounds from yesterday’s closing levels
USDCAD snapshot: open 1.3693-97, overnight range 1.3608-1.3754, close 1.3604, WTI $82.35, Gold $1647.74
The Canadian dollar has had a wild twenty-four hour.
USDCAD climbed to 1.3824 early yesterday morning, plummeted to 1.3604 by the end of the day, then rallied to 1.3754 in Europe overnight, before dropping to 1.3665 in NY.
Domestic influences had little bearing on the price action as it was all driven by the UK bond market reaction to the “mini-budget” from Prime Minister Liz Truss’s government. Soaring gilt yields forced the Bank of England to step into the fray with “targeted quantitative easing.”
The BoE actions calmed bond markets and reversed a surging US dollar rally.
FX traders are cautious. There is a heightened risk of further volatility on the approach to month and quarter-end in the face of elevated geopolitical tensions and hawkish Fed rhetoric.
WTI oil prices rose from $76.60/barrel yesterday to $82.79 in NY today with the gains derived from talk that Opec will announce a 1 million barrel/day production cut beginning November 1 at the October 5 meeting.
Canada July GDP is expected to fall 0.1% m/m which reflects the fading momentum from the pandemic reopening. The results will be overshadowed by US bond and equity market price action.
GBPUSD traded choppily in a 1.0764-1.0896 range with prices tracking both Gilt and Treasury yields. The technical picture is negative looking for further losses to 1.0300 while prices are below 1.1000.
EURUSD traded with a negative bias in a 0.9637-0.9737 range. Traders are awaiting today’s German inflation data which is expected at 10% y/y in September. Hawkish comments from ECB policy makers suggesting a 75 bp rate hike was appropriate in October, gave the single currency some support. However, EU economic sentiment (actual 93.7, previous 97.3) continues to deteriorate. The EURUSD technicals are bearish while prices are below 0.9790.
USDJPY traded sideways in a 144.10-144.80 range as US Treasury yields provided support and BoJ FX intervention fears limited gains.
AUDUSD is in the middle of its 0.6437-0.6524 range with price action tracking US dollar sentiment. August CPI was 6.8% y/y compared to 7.0% in July. NZDUSD traded with a negative bias falling from 0.5733 to 0.5650, before bouncing to 0.5690 in NY.
Today’s US data includes weekly jobless claims, (forecast 215,000), Personal Consumption Expenditures Prices (forecast Q2 7.1%) and Q2 GDP (forecast -0.6%)
