– Weak German and Eurozone data weighs on EURUSD.
– WTI gains give Loonie some support.
– USD opens higher from yesterday and consolidates gains overnight.
USDCAD: open: 1.3646-50, overnight range: 1.3632-1.3656, close 1.3635, WTI $86.96, Gold $1920.38
The Canadian dollar trad3ed quietly overnight after the Bank of Canada left interest rates unchanged yesterday. The BoC decision came as no surprise due to the string of weak domestic economic reports recently against a backdrop of slowing global growth. It was a statement only affair, but Governor Tiff Macklem will provide some further insight into the decision in a speech today at 2: 10 pm. EDT.
Three Premiers wrote the Governor letters urging him to stop raising rates and they may believe that Tiff was listening. He wasn’t. A rate hike wasn’t in the cards for yesterday but that doesn’t mean the rate hike cycle is at an end. The BoC’s mandate is price stability which is understood to mean that inflation stays in the middle of its 1-3% target. The BoC’s track record on forecasting inflation moves has been abysmal and there is no reason to suggest things will change any time soon.
The latest surge in oil prices is inflationary and many analysts expect that prices will rise to $100.00/b before year end.
EURUSD is at its session low after trading in a 1.0704-1.0724 range overnight. Eurozone Q2 GDP was a tad worse than expected at 0.5% (forecast 0.6% y/y), and a 1.3% gain in Eurozone employment (forecast 1.5%) exacerbated the negative sentiment. Also, German Industrial Production fell 0.8% m/m in July and dropped 1.9% in the May-July period. ING economists warn that today’s data elevates the risk for a German recession. The intraday technicals are bearish below 1.0830.
GBPUSD also took it on the chin and dropped from 1.2511 to 1.2450 after Halifax House prices tumbled to a 14-year low in August (actual -4.6% for 3 months June-August). Broad-based US dollar demand and bearish GBPUSD technicals while below 1.2640 are weighing on prices.
USDJPY traded warily in a 147.37-147.88 range. Steady to higher US Treasury yields supported prices but the fear of BoJ intervention capped gains after yesterday’s verbal warnings from the Finance Ministry and the BoJ.
AUDUSD traded in a 0.6362-0.6377 range. Philip Lowe’s final remarks as RBA Governor had little impact. He complained about his negative portrayal in the media while admitting some of his explanations missed the mark.
US weekly jobless claims and speeches by Fed policymakers Harker, Williams and Goolsbee are ahead.