– US 10-year Treasury yield hits 4.737%
– RBA leaves monetary policy unchanged.
– US dollar extends gains against major G-10 currencies.
USDCAD: open 1.3716-20, overnight range: 1.3662-1.3729, close 1.3676, WTI $88.91, Gold, $1826.46
The Canadian dollar is rapidly depreciating, but the same fate is befalling other major G-10 currencies. This situation can be attributed to the strength of the US dollar, driven by the robust American economy. This strength persists despite the 550 basis points of rate hikes implemented since March 2022 and the anticipation of further rate increases later this year. Moreover, analysts are placing their confidence in the Federal Reserve’s Summary of Projections, which suggests that interest rates will remain at or above current levels throughout 2024 and into 2025.
The political crisis involving Canada and India has taken a turn for the worse. India recently expelled 41 Canadian diplomats, giving them until October 10 to depart the country. This dispute originated when Prime Minister Trudeau accused the Indian government of complicity in the murder of a Sikh activist who was also a Canadian citizen.
The Canadian dollar is not finding support from oil prices either. West Texas Intermediate (WTI) has dipped below $90.00 per barrel due to the strengthened US dollar. However, there are hopes that higher demand and reduced production will limit further losses.
While the US JOLTS job opening survey is anticipated to reveal a drop to 8.0 million from last month’s 8.27 million, traders are more focused on tomorrow’s ADP data and Friday’s nonfarm payrolls report.
EURUSD displayed limited conviction within a range of 1.0466 to 1.0494. Prices are facing downward pressure due to heightened investor demand for US dollars, with some support stemming from comments by ECB Governing Council Member Louis De Guindos. He dismissed the possibility of rate cuts and emphasized that such discussions are premature.
GBPUSD is presently consolidating losses within a range of 1.2061 to 1.2097. The currency pair continues to grapple with challenges arising from the dovish monetary policy outlook of the Bank of England, which contrasts with the hawkish stance of the Federal Reserve.
USDJPY inched higher within a range of 149.66 to 149.96, with demand driven by US 10-year Treasury yields reaching levels last seen in 2008. Finance Minister Shunichi Suzuki intervened verbally and emphasized the significance of stable currency movements reflecting economic fundamentals.
AUDUSD traded heavily within a range of 0.6295 to 0.6371 due to the Reserve Bank of Australia leaving interest rates unchanged and the prevalent demand for the US dollar.