- A rash of Fed officials have a relatively hawkish outlook for rates.
- Qatar claims US and Iran agreed to continue talks
- US dollar extends yesterdays gains overnight.
USDCAD open (6:00 am): 1.4219, overnight range 1.4179-1.4222, close 1.4190, WTI $86.84, Gold $4,050.87.
It’s Remembrance Day in Canada and Veterans Day in America. Banks and bond markets are closed but stock markets are open.
The Canadian dollar is under pressure as a result of yesterday’s US October inflation report. Headline and core CPI both ran hot in October, and then a parade of Fed speakers tried to sound even hotter than the numbers. Fed Governor Waller said he supported a 50 bp rate hike in December if inflation numbers were hot. They were. US CPI climbed 0.4% m/m against a 0.3% forecast and core rose 0.3% versus 0.2% expected.
WTI has chopped in a 85.83-87.39 range and is holding steady after two losing sessions. Fresh attacks on Saudi Arabia’s East-West pipeline and a tanker hit near Hormuz are tugging prices one way. Reports out of Qatar of a two-week US-Iran agreement to keep talking are tugging the other.
Everybody wants US dollars. The dollar index jumped from 101.49 to 102.50 in early New York trade, powered by an economy that keeps shrugging off higher rates (just look at payrolls and retail sales), a flock of openly hawkish Fed officials and a 10-year Treasury yield that has pushed through 5.00%. Don’t hold your breath for fireworks today, though. Remembrance Day and Veterans Day closures should keep FX on a short leash.
Asia finished mostly in the green. Japan’s Topix added 0.82% and Australia’s ASX 200 rose 0.27%, while Hong Kong’s Hang Seng slipped 0.98%.
As of 7:30 am, the German DAX up 0.73%, the UK FTSE 100 has gained 0.38% and the French CAC-40 up 0.29%. S&P 500 futures have risen 0.86%, the DXY is 102.52, and the US 10-year yield is 5.008%.
EURUSD has dropped to the floor of its 1.1132-1.1170 overnight range as the US dollar gets bought across the board. Hawkish talk from a string of Fed officials is leaning hard on the single currency. Germany’s final October CPI confirmed inflation at 2.8% y/y, and nobody cared.
GBPUSD is at the bottom its 1.3308-1.3356 band, crushed by fresh US dollar buying once a 50 bp December hike crept into the FOMC conversation. Today’s National Institute of Economic and Social Research (NIESR) was not an issue. The NIESR sees UK inflation staying above target for four years and peaking at 4.4% in 2027.
USDJPY rallied from 158.67-159.19 while ignoring a solid Reuters Tankan. Manufacturer sentiment rose to +27, the best in more than five years, made no difference but it was higher US Treasury yields that drove the rally.
AUDUSD edged lower in a tight 0.6862-0.6886 band, dragged down by the hot US inflation report and a couple of soft Australian surveys. Westpac consumer sentiment slumped to 78.2 in November from 80.4, its weakest since late 2022, and home lending collapsed 15.5% in the third quarter.
Neither Canada nor the US has any economic data of note today.
