- Canadian economy expected to have flat-lined in Q4.
- US PPI and Chicago PMI data may not have much impact on FX.
- US dollar grinds out small gains overnight.
USDCAD open: 1.3674, overnight range 1.3659-1.3712, close 1.3682, WTI 66.56, Gold 5177.59
The Canadian dollar has gone nowhere this week and is tracking toward a flat close, with attention fixed on this morning’s December GDP release. Q4 growth is projected at 0% y/y, a sharp drop from the prior 2.6% pace, while Statistics Canada pegs December output at 0.1% m/m versus 0.0% in November.
Even so, the numbers are backward-looking and unlikely to move the needle. Traders are far more focused on what lies ahead, namely an increasingly combative US/Canada trade backdrop.
Prime Minister Carney is in India attempting to repair strained ties and expand commercial links. India’s High Commissioner to Canada, Dinesh Patnaik, told CBC News that energy demand in India is immense and that they are prepared to purchase whatever Canada can supply, whether crude, LPG, or LNG.
WTI is pressing the upper end of its 64.88-66.55 range after US/Iran discussions in Geneva, conducted with the two sides in separate rooms, ended without progress. Betting markets are pricing roughly a 37% chance of a US strike next week and about 63% by the end of March.
Today’s US calendar features PPI, Chicago PMI, and construction spending, but equities will likely dictate the tone for FX into the close.
Asian equity markets finished the session mixed. Japan’s Topix advanced 0.97% and Australia’s ASX gained 0.52%, while Hong Kong’s Hang Seng declined 1.44%.
At 7:30 am, European markets were modestly firmer. The Germany’s DAX gained 0.20%, the French CAC-40 is down 0.18% and the UK FTSE 100 is up 0.49%. S&P 500 futures have lost 0.42%, the US Dollar Index is 97.72 and the 10-year Treasury yield is 3.986%.
EURUSD traded inside a 1.1789-1.1822 band and is hovering near the midpoint of that range in New York. Regional German inflation readings and an unchanged 6.3% unemployment rate failed to generate any traction. For now, price action suggests a holding pattern, with 1.1760-1.1860 framing the near-term consolidation zone.
GBPUSD slid from 1.3508 to 1.3462 after the governing Labour Party finished third in a by-election that it had controlled for nearly a century, with the Greens taking the seat. The result has sparked renewed chatter about Prime Minister Starmer’s durability. Disappointing GfK consumer confidence, printing at -19 versus -16 previously, added to the softer tone.
USDJPY traded in a 155.54-156.23 corridor. Tokyo CPI rose 1.8% y/y, slightly above expectations but below the prior 2.0% pace. Retail sales surprised to the upside at 1.8% y/y, sharply outperforming forecasts for a 0.4% decline. Even so, the pair remains pulled between speculation about further Bank of Japan tightening and the prospect of additional fiscal stimulus.
AUDUSD bounced between 0.7096 and 0.7132 and is on track to finish February up 1.42% versus the US dollar. The lift came after firmer inflation data revived expectations that the RBA may need to tighten policy further.
