– Markets still reeling from disappointing US CPI data.
– Tightened US sanctions on Russian crude boosts WTI.
– US dollar rebounds and hangs on to gains.
USDCAD: open: 1.3641-45, range 1.3633-1.3662, close 1.3659, WTI $86.47, Gold, $1916.12.
The Canadian dollar consolidated last week’s losses in an uneventful FX overnight session. Traders eased into the new week, which is rife with top-tier regional data, speeches by many Fed officials, including Chair Jerome Powell on Thursday. Mr. Powell’s speech is highly anticipated as it is viewed as a preview of the November 1 Federal Open Market Committee meeting.
Numerous FOMC policymakers alluded to the Fed pausing again in November, with most suggesting that rates may have risen all that they need because inflation will slowly drift down to its 2.0% target. Philadelphia Fed President Patrick Harker was one of them. On Friday, he said, “I believe that we are at the point where we can hold rates where they are. By doing nothing, we are still doing something. And, actually, we are doing quite a lot.” He added his voice to the chorus of Fed officials suggesting that higher Treasury yields could eliminate the need for higher rates. Nevertheless, the September dot-plot projections pointed to one more rate hike in 2023.
The US dollar is catching a bit of a haven bid due to fears that Israel’s reaction to the Palestinian Hamas attacks may lead to a bigger conflagration if Iran and its Hezbollah puppets join the fray. Those fears weighed on the major Asian equity indexes, which closed with losses, led by a 2.03% drop in the Japanese Nikkei 225 index. European equity indexes are faring better and are modestly higher, with the UK FTSE 100 index rising 0.37%. The US 10-year yield rose from 4.63% at the end of Friday to 4.70% in NY.
Canadian dollar traders will have a buffet of economic data to feast on this week, starting with August Manufacturing Sales and Wholesale Sales, alongside the Key Bank of Canada Business Outlook Survey and the Canadian Survey of Consumer Expectations today. The surveys are key components in the BoC deliberations, and if consumer expectations suggest inflation will remain higher for longer, the BoC could hike rates.
EURUSD traded between 1.0509 and 1.0543, backed by somewhat hawkish ECB comments overshadowed by geopolitical events. A bearish outlook prevails below 1.0600, targeting 1.0450 and potentially 1.0200.
GBPUSD ranged from 1.2137 to 1.2178 amid concerns of US rate hikes while UK rates hold steady. Focus on upcoming wage and inflation data.
USDJPY drifted between 149.35 and 149.63, bolstered by rising US Treasury yields but capped by BoJ intervention fears.
AUDUSD traded 0.6300 to 0.6333, finding support as Australians rejected a constitutional change, seen as a rebuff of “wokeness” championed by PM Anthony Albanese
.