– GBPUSD soars after UK Chancellor scraps Kwasi mini budget
– Wall Street poised to open in positive territory
– US dollar trading mixed but defensively
USDCAD snapshot: open 1.3813-17, overnight range 1.3803-1.3877, close 1.3882, WTI $85.78, Gold $1656.78
The Canadian dollar may experience homegrown volatility this week thanks to today’s BoC Business Outlook Survey (BOS) and Wednesday’s inflation report.
The BOS is expected to show wage and pricing plans have topped out with analysts expecting to see a drop in the longer-run inflation outlook. If so, the Bank of Canada may be less motivated to raise interest rates as aggressively as the Fed.
That may not be the case, judging from BoC Governor Tiff Macklem latest comments. He said “The economy is clearly overheated. You can see this is very evident in labor markets where we’ve got very high vacancies. Businesses are certainly telling us that they’re having trouble finding enough workers to meet the demands of all the clients. We have yet to see a clear turning point in underlying inflation. Inflation continues to broaden across goods and services.”
The Governor is also worried that more people will believe that inflation could stay higher for longer.
WTI oil prices peaked in Europe at $86.88/b, dropped to $85.22/b just before NY opened and are trading at $86.21. The top side is capped after China’s Xi Jinping suggested there would be no change in the zero-covid policy which suggests Chinese economic growth will continue to be slow which will lower global demand. The downside is underpinned by the planned production cuts that start November 1.
The US dollar continues to be supported by expectations for higher interest rates. St Louis Fed President James Bullard warned of 150 bps in hikes before the end of 2022.
EURUSD traded in a 0.9717-0.9770 range with prices tracking broad US dollar sentiment and supported by more hawkish comments from ECB officials calling for higher interest rates.
GBPUSD climbed in a 1.1181-1.1330 band after Jeremy Hunt, the new Chancellor of the Exchequer trashed his predecessors “mini-budget” which caused chaos in UK financial markets.
USDJPY traded sideways in a 148.43-148.89 band. Gains were limited to du the risk of intervention while prices were supported by firm US Treasury yields.
NZDUSD churned in a 0.5553-0.5613 range. Prices garnered a bit of support as the market is pricing in the RBNZ’s OCR rate reaching 5.0% by mid-2023.
The US data calendar is empty.