- Hawkish Fed rhetoric underpinning US dollar
- Another barrage of Fed-speak is on tap today
- US dollar is bid and consolidating yesterdays gains
USDCAD open (6:00 am): 1.4243, overnight range 1.4240-1.4265, close 1.4252, WTI $85.80, Gold $3,955.35.
The Canadian dollar is licking its wounds after sinking yesterday, weighed down by hawkish Fed-speak and widening Canada/US interest rate spreads.
The latest US inflation figures and a flurry of comments from Fed officials have analysts warming to the view that the Fed blundered by standing pat. Meanwhile, in Canada, the argument is over whether the BoC should have hiked at all with the economy slowing and employment soft. The Bank’s own inflation data suggest it didn’t need to. The minutes of its deliberations back that up, showing a Governing Council divided between holding and tightening.
WTI chopped in a $85.21-87.51 band overnight with traders gleaning a ray of hope for an end to the US/Iran war after the Wall Street Journal reported that US Vice President JD Vance is mulling a meeting with IRGC officials. Oil is also weighed down by news the EIA data showing a 9-million-barrel build in US crude stockpiles.
Fed officials are talking up a storm and for the most part they have a hawkish view on interest rates. Today, Beth Hammack, Austan Goolsbee, John Williams, Mary Daly and Michael Barr are all lined up an this week’s US dollar’s gains are mainly driven by Fed-speak.
Asia was a mixed bag overnight. Japan’s Topix added 0.20%, Hong Kong’s Hang Seng slid 1.26% and Australia’s ASX 200 went nowhere.
As of 7:35, the German DAX is up 0.71%, the French CAC-40 is up 0.63% and the UK FTSE 100 has risen by 0.34%. S&P 500 futures have slipped 0.42%. The DXY sits at 102.94, and the US 10-year yield is at 5.00%.
EURUSD churned in a1066-1.1100 range. The selling stems from talk that the Fed got it wrong by holding rates steady on October 28 and will now have to play catch-up. Markets also see the ECB’s anticipated December hike as its last for some time, and nobody has stopped fretting about France’s public finances.
GBPUSD rebounded off its overnight trough within a 1.3250-1.3283 band after a batch of UK data. Third-quarter GDP expanded 0.7% and was up 1.9% year over year, as expected. September industrial production climbed 0.3% when economists had pencilled in a 0.3% drop, and manufacturing output picked up to 4.4% y/y from 2.5%. Still, it’s the US interest rate outlook driving price action.
USDJPY drifted in a tight 159.48-159.95 band overnight. The proximity to 160.00, attracted the attention of Atsushi Mimura, Japan’s top currency diplomat. He reiterated his usual warning about excessive moves and reminded everyone of this summer’s intervention. Traders yawned. Meanwhile, Japanese wholesale inflation jumped to 7.1% y/y.
AUDUSD chopped sideways in a 0.6815-0.6865 range. Prices are on the defensive because ofheld US dollar strength and the gap between Fed and RBA policy paths.
