- China trims its 1-year LPR by 10 bps.
- Market focused on Friday’s Jackson Hole Symposium
- US dollar ticks lower but remains inside recent ranges.
USDCAD: open: 1.3520-24, overnight range: 1.3500-1.3554, close 1.3552, WTI $81.96, Gold $1889.26
The Canadian dollar is looking lost. The currency is consolidating its recent losses as traders are focused on US Treasury yields and Friday’s speech by Fed Chair Jerome Powell at the Jackson Hole Symposium.
US Treasury yields continued to climb last week and extended its gains overnight, rising to 4.31% overnight. The sharp rise in Retail Sales reported last week underscored the resilience of the consumer and suggested that rates need to stay higher for longer.
The strong data argues that Mr Powell’s remarks on Friday, will be hawkish which will keep the US dollar in demand.
The Bank of Canada is another central bank that will surprise markets with a hawkish outcome. Domestic inflation readings remain elevated and well-above the BoC target, the employment market is still very tight, and housing prices appear to have bottomed out.
The risk that the BoC raises rates by 25 bps on September six is serving to limit Canadian dollar losses.
Oil prices are steady. West Texas Intermediate traded in a $81.10-$82.44 range overnight. Prices continue to be underpinned by recent production cuts but fears of lower demand from China has capped gains.
China pared its 1-year Loan Prime rate by 10 bps, from 3.55% to 3.45%. The move was somewhat surprising mainly because the cut was smaller than expected and markets were unimpressed.
Turning to the European markets, an upward trajectory is evident. The German Dax displayed a gain of 0.77%, while the UK FTSE 100 demonstrated a 0.50% increase. The US market signaled comparable optimism, with S&P 500 futures marking a 0.48% rise.
EURUSD saw a marginal appreciation, situating itself near the upper bounds of its 1.0870-1.0913 range. It is noteworthy that the recent weaker-than-projected German PPI index for July, reflecting a decline of 1.1% versus the anticipated 0.2% month-on-month decrease, may potentially constrain the currency's ability to breach resistance around the 1.0930 level.
EURUSD inched higher and is at the top of its 1.0870-1.0913 range. The weaker than expected Germany July PPI index (actual -1.1%, forecast -0.2% m/m) suggests the single currency will struggle to break resistance in the 1.0930 area.
GBPUSD rose in a 1.2711-1.2750 band, on the heels of stock market gains. The price action will be muted ahead of Fed Chair Powell’s remarks, Friday.
USDJPY is trading with a bid in a 145.15-145.96 range with prices underpinned by the contrasting BoJ and Fed interest rate outlooks.
Meanwhile, AUDUSD grappled within the 0.6393-0.6421 range, reflecting apprehensions surrounding China's economic trajectory and the dovish sentiment emanating from the Reserve Bank of Australia.
The US calendar remains uneventful, while Canada is poised to release new house price index data
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