- Loonie suffering from broad-based US dollar strength.
- WTI oil prices fall 4.0%
- US dollar opens with a mixed tone-commodity bloc currencies underperform.
USDCAD: 1.3645, overnight range 1.3611-1.3648, close 1.3620, WTI $75.59, Gold, $2640.61
The Canadian dollar remains under pressure partly because the CAD/US 10-year interest rate spread narrowed in Canada’s favour. That occurred despite Fed officials and the recent nonfarm payrolls report suggesting that the Fed will only cut rates in November by 25 bps. Meanwhile, Canada’s weak economy, and the risk of deflation leaves the door wide open for the Bank of Canada to cut rates by 50 bps on October 23.
Hurricane Milton is expected to hit the Florida Gulf Coast as a Category 5 storm. However, the disruption to US oil production is anticipated to be minimal which is why WTI oil prices dropped about 4.0% overnight.
The only data of note are the Canadian and US trade reports, neither of which will impact FX trading.
EURUSD moved slightly higher overnight, trading within a narrow range of 1.0972 to 1.0998, though it remains well below Friday's pre-NFP high of 1.1040. A 2.9% increase in German Industrial Production for August, exceeding the expected 0.8%, likely provided some support for the euro. However, analysts at ING caution that this rise may be more of a temporary technical rebound rather than a sign of sustained recovery.
GBPUSD flitted between 1.3064 and 1.3104. The pound remains under pressure, largely driven by concerns that the Bank of England could cut interest rates more aggressively than the Federal Reserve. Governor Andrew Bailey hinted at this possibility last week. Additionally, UK BRC Retail Sales grew by 1.7% in September, an improvement from August’s 0.8% rise.
USDJPY held steady in a range of 147.34 to 148.20, consolidating its gains from Friday. The pair remains supported by the US 10-year Treasury yield, which is currently sitting at 4.03%. Traders are dismissive of the usual verbal interventions by Japanese officials.
AUDUSD dropped from 0.6769 to 0.6715 due to weaker commodity prices, mixed economic data, and unclear signals from the Reserve Bank of Australia (RBA) minutes. The lack of fresh stimulus from China's National Development and Reform Commission also weighed on commodity prices. The RBA minutes revealed discussions on both rate hikes and rate cuts, while the NAB Business Confidence survey fell by 0.2, a slight improvement over the previous month's -0.5.
There are no notable Canadian or US economic reports today.
