– Loonie suffers on interest rate outlook.
– US GDP and quarterly earnings reports in focus.
– US dollar trades modestly lower but not against CAD
USDCAD: open 1.3915, overnight range 1.3902-1.3925, close 1.3915, WTI $67.59, Gold, $2784.56
The Canadian dollar was the laggard yesterday and in overnight trading. The US dollar drifted lower against the G-10 majors but managed to squeeze higher against the Canadian dollar and it was mainly due to Bank of Canada Governor Tiff Macklem repeating is dovish rate outlook in front of the House Finance Committee.
Mr Macklem’s testimony yesterday sounded slightly more optimistic and hinted at a stronger confidence in the stability of inflation, supporting the likelihood of rate cuts if economic indicators align with expectations. Analysts still expect the BoC to cut rates in December but are undecided between a 25 or 50 bp rate cut.
Yesterday’s US JOLTS data was far weaker than expected and contradicted the “robust jobs market” narrative in place following the September employment report. There are more US employment reports this week with the ADP data today and weekly jobless claims on Thursday followed by Friday’s nonfarm payrolls report. Weaker than expected results may prompt the Fed to become more aggressive with rate cuts.
EURUSD climbed from 1.0813 to 1.0859 after Germany’s Q3 GDP rose 0.2% quarter-on-quarter, surpassing the forecasted -0.1% and averting a recession. The Eurozone’s Q3 GDP also exceeded expectations with a 0.4% increase over the anticipated 0.2% gain. These results are unlikely to dissuade the European Central Bank from further rate cuts, as they indicate that current policy measures are achieving desired effects.
GBPUSD chopped in a 1.2965 -1.3027 band, hitting its low in early New York trading partly due to EURGBP demand following the better than expected eurozone data. Market participants are largely on hold, awaiting the release of the UK budget, U.S. GDP data, and a set of quarterly earnings reports.
USDJPY remains steady, trading between 152.80 and 153.47. Traders are in a holding pattern amid political uncertainty following an election that left the ruling coalition without a majority. Additionally, markets are cautious ahead of the Bank of Japan’s upcoming monetary policy meeting.
AUDUSD trade in a 0.6537 to 0.6586 range after lower-than-expected inflation data (0.2% q/q vs. the expected 0.3% and prior 1.0%). This lower inflation figure could prompt the Reserve Bank of Australia to consider an earlier-than-planned rate cut.
Today’s US data includes ADP employment (forecast 115,000 vs September 143,000), Core Personal Consumption Expenditures (forecast 2.1% vs previous 2.8%), Q3 GDP (forecast 3.0% y/y, unchanged from previous), and Pending Home Sales.
