- Rising covid cases in China boosts US dollar
- Equity markets trading mixed in low volumes
- US dollar opens on firm footing due to safe-haven demand
USDCAD snapshot open 1.3425-29, overnight range 1.3377-1.3440, close 1.3385, WTI $79.49, Gold $1741.68
The Canadian dollar ended the week on a negative note then extended the losses overnight.
Risk sentiment turned negative due to reports of rising coronavirus cases in China with areas in and around Beijing facing more stringent restrictions and some areas getting locked down. Hong Kong’s covid problem is driving authorities to consider cutting non-emergency services at hospitals.
Traders are also unsettled by the ongoing contradictory comments coming out of Fed officials. Some officials are arguing that the 300 bps in hikes this year just needs some time to impact inflation and therefore the Fed can slow the pace of hikes. Others believe inflation is far to high and rates need to continue to rise to ensure the battle is won.
Trading activity is off to a slow start due to the upcoming US Thanksgiving holiday and the start to the FIFA World Cup in Qatar.
England is playing Iran which means UK traders are in pubs or watching the match on the telly.
Asian equity indexes closed with Chinese markets in the red. Japan’s Nikkei 225 squeezed out a tiny gain while and Australia’s’ ASX 200 ticked lower.
European bourses are showing modest losses, led by the German Dax which is down 0.41%
S&P 500 index futures are down 0.51% while gold and oil prices are a tad lower. The 10-year Treasury yield is steady at 3.832%.
USDCAD rallied from 1.3377 to 1.3440 where it sits in early NY trading. The rally is supported by modestly negative risk sentiment and the drop in oil prices.
West Texas Intermediate (WTI) fell through the $80.0/b0 support level, dropping from $80.20/b to $79.08 due to fears of slowing demand from China as covid cases rise.
EURUSD is at the bottom of its overnight 1.0227-1.0332 range. Prices are weighed down by broad US dollar strength and dovish comments by ECB officials. Chief Economist Philip Lane discussed the incremental pace of rate hikes and said, "the more we've already done, the less we need to do. The logic of a pause for the ECB: we’re not at that point; you want to make decent progress on raising the policy rate before you start mapping out QT.”
GBPUSD dropped from 1.1896 in Asia to 1.1794 in NY due to broad US dollar strength. Prices continue to trend higher following the mid-October budget disaster. The short term technicals are looking for a break above 1.2000 to target 1.2275.
USDJPY rallied from 140.17 to 141.95 due to widespread US dollar demand and fears about higher US interest rates.
AUDUSD is at the bottom of its 0.6607-0.6682 range due to fears of a renewed slowdown in China from covid restrictions.
The Chicago Fed National Activity Index is ahead.
