- Markets choppy due to contradictory Fed comments
- WTI oil under pressure from recession fears
- US retreats, CAD underperforms
USDCAD snapshot open 1.3329-33, overnight range 1.3302-1.3351, close 1.3327, WTI $81.47, Gold $1765.04
The Canadian dollar is struggling to make headway even as the US dollar retreats against most of the other major G-10 currencies.
The US dollar opened on a soft note and is poised to finish the week with losses except against the Swiss Franc and the Japanese yen. The New Zealand dollar is the best performing currency this week after higher-than-expected NZ inflation set the stage for a 75 bp rate hike at next week’s Reserve Bank of New Zealand monetary policy meeting.
This week’s comments by a series of Fed officials points fueled the volatility in markets. Vice Chair Lael Brainard told Bloomberg on Monday ““I think it will probably be appropriate soon to move to a slower pace of rate increases.” Philadelphia Fed President Patrick Harker agreed and said he expected the pace of interest rate increases to slow in the coming months.
Those comments, combined with a report that a Russian missile landed in Poland dropped the US 10-year Treasury yield to 3.67% from 3.91% before the bounced to 3.80% today.
St Louis Fed President James Bullard does not believe it is time to slow the pace of rate hikes. He wants rates to rise to at least 5.0-5.25%, at a minimum.
Nevertheless, equity traders do not seem concerned today. S&P 500 futures have climbed 0.68% overnight, partly because of the deflationary impact from lower crude prices.
West Texas Intermediate (WTI) oil extended this week’s losses and fell from $82.60/barrel to $79.97/b in NY. Traders fear lower demand from China due to rising covid cases and rising US recession fears if the Fed keeps hiking rates.
The sinking oil prices are undermining the Canadian dollar even as the US dollar falls.
EURUSD traded in a 1.0334-1.0395 range band boosted by broad US dollar weakness and comments by ECB President Christine Lagarde warning of higher rates.
GBPUSD traded in an 1.1860-1.1949 range as the concerns around the UK budget faded. Retail Sales rose 0.6% m/m in October (forecast 0%).
USDJPY traded in a 139.64-140.49 range with the low seen after another North Korean missile landed 120 kilometers from Japan. Japanese inflation was higher than expected at 3.7% y/y (forecast 2.7%).
NZDUSD climbed from 0.6126 to 0.6187 ahead of an expected 75 bp rate hike next week.
There are only second-tier US economic reports today.
