- Canadian inflation expected to have fallen in December
- FX risk sentiment mildly negative
- US dollar opens lower compared to close
USDCAD snapshot: open 1.3422-26, overnight range 1.3396-1.3435, close 1.3407, WTI $79.89, Gold $1906.36
The Canadian dollar continues to trade erratically inside a narrow band that has contained price action since January 6.
USDCAD dropped through support at 1.3460 following the surprising strong Canadian employment report and has spent the past 11 days trading in a 1.3322-1.3460 trading range.
That may change today with the release of Canadian inflation data for December. Headline CPI is expected to have dropped to 6.3% y/y from 6.8% y/y in November. Core-CPI is forecast to have risen to 6.1% from 5.8% y/y. The BoC will be more concerned with the performance of their preferred measures, CPI Medium and CPI-Trim. If these numbers continue to fall the BoC may be less motivated to raise rates next week.
WTI oil traded in a $78.57/b-$80.39/b range overnight and it is helping limit USDCAD gains. Goldman Sachs analysts reiterated their call that western economies will avoid a recession, China’s oil demand will improve, and Russian supply will sink, which combined, will boost crude prices.
US traders return from a long weekend to find risk sentiment is a tad negative which is partly due to weak Chinese data. China Q4 GDP rose 2.9% y/y which beat the 1.8% forecast but well below earlier estimates Retail Sales and Industrial production were weaker than the previous result, but still better than expected.
EURUSD is trading near the top of its 1.0807-1.0838 overnight range, supported by hawkish comments from ECB officials suggesting higher interest rates are still required. Prices got an added boost after the German ZEW Indicator of Economic Sentiment jumped 40.2 points to 16.9. It is in positive territory for the first time since February 2022.
GBPUSD rallied from 1.2171-1.2258 range due to better-than-expected UK employment data. The unemployment rate was unchanged at 3.7% while average hourly earnings rose 6.4% compared to 6.1% y/y in the 3month period.
USDJPY traded higher in Asia and lower in Europe while locked in a 128.22 to 129.15 range. The price action is choppy ahead of tomorrows BoJ meeting.
AUDUSD is trading in a 0.6931-0.6977 range. Support from better than-expected Westpac Consumer Confidence data (actual 5.0% vs 3.0% in December) faded in early NY.
