- Fed rate hike odds in October are fading away
- Oil prices remain firm due to ongoing Middle East tensions
- US dollar sliding against G-10 majors.
USDCAD open (6:00 am) 1.4157, overnight range 1.4148-1.4199, close 1.4186, WTI $97.41, Gold $4,177.54.
The Canadian dollar is at the top of its October range after the greenback gave back the swagger it picked up from Wednesday’s CPI report and Fed Chair Warsh failed to provide and guidance on US rates in a speech in Thailand.
Bank of Canada Governor Tiff Macklem had a bit more to say. He pointed out threat the BoC had looked past higher energy costs, but the longer they persist, the harder that strategy becomes.
WTI traded 96.85-98.25 overnight and is trading near its session peak. Trump says Iran has asked for a halt to US attacks and that talks continue while also saying he had no plans to use nukes in Iran.
There is no Canadian data of note today.
Odds for October Fed Rate Hike Fade
Fed Chair Kevin Warsh sank the greenback overnight. It wasn’t what he said but what he didn’t say and he didn’t say anything about monetary policy. He offered no guidance, no promises, and merely said that the October and December meetings will settle the matter. His one notable aside, that AI spending will lift demand well before it lifts capacity, should have rattled the doves.
Cleveland's Hammack went further, saying the Fed could have to lean in harder if households and businesses start baking in higher inflation. None of it landed. Yields drifted lower, the dollar kept bleeding, and the odds of an October move have shrunk, although a December hike remains close to a lock.
Asian equity indexes closed higher. Hong Kong's Hang Seng firmed 0.52%, the Australian ASX 200 gained 1.0% and Japan’s Topix rose 1.67%.
As of 7:30 am in Europe, the German Dax is up 0.99%, the French CAC-40 is up 0.36% and the UK FTSE 100 is flat as are S&P 500 futures. The US 10-year Treasury yield is 5.115% and the DXY is 101.67.
EURUSD climbed through a 1.1151-1.1269band and is leaning on the top of it at 1.1250, with the dollar losing ground everywhere. The final September HICP print stuck at 3.8% y/y, and with French prices heating up, the ECB's tightening debate is far from settled.
GBPUSD powered higher in a 1.3267-1.3349 range, touching its best level in three weeks and sitting at 1.3330, with 1.3340 next in line. Bailey vented about inflation stuck above target but said it is still unclear whether the energy spike is feeding into wages and broader prices. The consensus now has the BoE tightening in November, and cable is getting there first.
USDJPY drifted in a tight 157.80-158.18 channel and is parked at 158.00, flat on the day. BoJ board member Junko Koeda argued the Bank cannot afford to drag its feet on rate hikes with inflation risks skewed higher, another hawkish voice before the October 29-30 meeting. Even so, the yen cannot gain traction against a soft dollar, which says plenty about the yield gap.
AUDUSD bounced within a 0.6916-0.6968 range to 0.6958, ignoring a grim September jobs report that showed 39,300 positions lost and unemployment up to 4.7%, a near five-year high. Pricing for an RBA hike on November 3 has sunk under 20% from roughly 35%, so the rally owes everything to the weak greenback and a better risk mood. The RBA publishes its annual report today.
Today’s US data includes September import/export prices, Industrial production and capacity utilization.
