– Oil rally fueling Canadian dollar gains.
– Canada CPI not such a big deal.
– US dollar opens mixed as commodity currency bloc outperforms.
USDCAD open: 1.3444-48, overnight range: 1.3442-1.3491, close 1.3485, WTI $91.29, Gold, $1935.18.
The Canadian dollar has broken through resistance and surged higher in early NY trading due to broad-based commodity currency demand and rising oil prices.
West Texas Intermediate (WTI) climbed to $91.68 per barrel from $90.89, driven by hawkish supply outlooks from delegates at the World Petroleum Congress in Calgary. The CEO of the Saudi Arabian Oil Company (Aramco) told delegates at the World Petroleum Congress in Calgary yesterday that he envisions oil production growing to 110 million barrels per day by 2050.
Canada has set a Net-Zero emissions goal by 2050, and comments by Saudi Energy Minister Abdulaziz bin Salman indirectly suggested that the goal may be unrealistic. He stated, “If we truly want to transition, we must ensure that the transition includes energy security, affordability, and does not hinder economic prosperity and growth. If these aspects are not addressed, it becomes challenging to address climate change.”
The Canadian dollar’s gains have turned the short-term USDCAD technical outlook negative. This morning’s break of USDCAD support at 1.3440 implies further losses to 1.3300.
Canada’s August CPI is expected to have increased by 3.8% year-on-year, while the Bank of Canada’s inflation forecast is a median of 3.7% (previously 3.7) and a trimmed mean of 3.5% (previously 3.6). It’s not worth getting overly concerned about increased odds of a Bank of Canada rate hike if the data exceeds expectations because another CPI report is due before the BoC monetary policy meeting on October 25.
Furthermore, the impact of domestic inflation data on USDCAD should be brief, as the focus is on tomorrow’s Federal Reserve (Fed) meeting. If policymakers at the Fed hint that US interest rates will remain higher for longer than currently expected, USDCAD could revisit 1.3600.
In the FX markets, trading remained within recent ranges overnight as traders eagerly awaited tomorrow’s FOMC meeting.
EURUSD is at the upper end of its range, between 1.0675 and 1.0710, supported by lower Eurozone inflation. HICP slipped to 5.2% year-on-year in August, down from 5.3% in July.
GBPUSD mirrored EURUSD’s movements and rose from 1.2370 to 1.2410.
USDJPY drifted higher in a range of 147.50 to 147.93, as the US 10-year Treasury yield remained unchanged at 3.319%.
AUDUSD received a boost from hawkish RBA minutes, which indicated that a rate hike was discussed, and it rallied from 0.6428 to 0.6464.
Upcoming data releases include US Building Permits and Housing Starts.