- Trump announces framework of a trade deal with Japan.
- Oil prices slump on fresh supply fears.
- US dollar drifts lower in quiet trading.
USDCAD open: 1.3997, overnight range 1.3982-1.4004, close, 1.3990, WTI 60.39, Gold 3905.01
The Canadian dollar wafted higher in subdued trading, as it caught an updraft from broad but minor US dollar selling. Gains are limited due to renewed US/Canada trade hostilities.
Markets are fully pricing in a 25 bp BoC rate cut tomorrow, but the real driver for the Canadian dollar continues to be the Fed’s decision, where a similar 25 bp cut is widely expected. Traders are likely to stay on the sidelines until both central bank announcements are out of the way.
WTI oil traded poorly within a 59.94-61.49 band after Bloomberg reported that OPEC plans to boost production by 137,000 barrels per day starting December 1. Sentiment was further dampened by comments from International Energy Agency Executive Director Fatih Birol, who said he expects lower oil and gas prices ahead.
Asian equity markets underperformed Wall Street, with Japan’s Topix falling 1.18%, Hong Kong’s Hang Seng down 0.33%, and Australia’s ASX 200 losing 0.48%.
European indexes were slightly negative as of 7:00 am, while S&P 500 futures were unchanged. The US 10-year Treasury yield sat at 3.98%
EURUSD traded in a 1.1644-1.1668 range and held a modest bid tone ahead of Wednesday’s FOMC meeting and Thursday’s ECB decision.
Traders are leaning toward a dovish outcome from both central banks, which is lending support to the single currency. Sentiment also improved slightly as investors grew hopeful that the US and China may strike a trade understanding, calming global risk nerves.
GBPUSD dropped from 1.3370 to 1.3301 after Chancellor Rachel Reeves admitted that lower-than-expected productivity would deal a £20 billion blow to public finances. She noted that the UK’s productivity record has been poor since the financial crisis and Brexit, which weighed on the currency as investors reassessed growth expectations.
USDJPY traded in a 151.76-152.90 band and drifted lower following mild verbal intervention from Japanese officials.
AUDUSD fluctuated within a 0.6545-0.6565 range, supported by fading expectations for an RBA rate cut next week and a broadly softer US dollar ahead of the Fed. Traders are content to stay sidelined until the policy outlook becomes clearer.
