– US CPI expected to fall to 4.1% from 4.3% y/y.
– FOMC minutes suggest Committee is divided.
– US dollar consolidating losses, opens mixed.
USDCAD: open: 1.3586-90, range 1.3578-1.3603, close 1.3594, WTI $84.19, Gold, $1881.17.
The Canadian dollar is adrift but trading with a mildly bullish bias due to lower US 10-year Treasury yields, hopes for higher crude prices from increased demand and supply disruptions, and FOMC minutes that suggest Fed policymakers are divided on their interest rate outlooks.
Today’s US inflation report has the potential to ignite a firestorm of activity, especially if CPI rises rather than falls as expected. Headline CPI is expected at 0.3% m/m compared to 0.6% last month, and 4.1% y/y vs. 4.3% in August. The more important Core-CPI is forecast unchanged at 0.3% m/m and 4.1% y/y compared to 4.3% in August.
Traders basically ignored slightly higher PPI data yesterday, but that won’t be the case with today’s CPI report.
The FOMC minutes revealed a divided Committee, but comments from officials since the September 20 meeting suggest an increasing number are in favor of adopting a “wait and see” approach. Governor Christopher Waller, who is also a voting member, is one of them. He said the Fed can “watch and see what happens to rates. The financial markets are tightening up, and they are doing some of the work for us.”
Boston Fed President Susan Collins and Atlanta Fed President Raphael Bostic are both non-voters. Nevertheless, they both advocate for a patient approach to rates.
EURUSD was steady in a 1.0614-1.0640 band. The single currency is underpinned by dovish Fed expectations, which were reinforced yesterday after comments by policymakers Bostic and Waller and by the FOMC minutes, which showed the Committee was divided. The Eurozone economic calendar was empty, and traders are waiting for US CPI.
GBPUSD consolidated this week’s gains in a 1.2293-1.2333 range, supported by news that the UK economy grew 0.2% in August and by broad US dollar weakness. Traders ignored the weaker than expected Manufacturing and Industrial Production reports. The intraday GBPUSD technicals are bullish above 1.2280, looking for a break of 1.2350 to extend gains to 1.2430.
USDJPY inched higher in a 148.95-149.28 range following dovish comments from BoJ board member Asahi Noguchi, who said that policymakers needed to guide policy with mainly downside risks in mind.
AUDUSD is trading at the bottom of its 0.6403-0.6431 range, partly due to fading enthusiasm for Chinese fiscal stimulus plans.
US weekly jobless claims data is expected to rise by 3,000 to 210,000.
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