– Governor Macklem in front of House Finance Committee today.
– Risk sentiment improves, slightly.
– Canadian dollar greatly underperforms vs Commodity bloc, US dollar opens softer.
USDCAD: : open 1.3743-47, overnight range 1.3843-1.3873, close 1.3874, WTI $84.58, Gold, $1996.54
The Canadian dollar is attempting to recoup Friday’s losses to start a very busy week which is chock-full of risks. The domestic and US data calendar is empty today but Canada will see top-tier data this week including August GDP on Tuesday, and the Labour Force Survey on Friday.
Bank of Canada Governor Tiff Macklem appears before the House of Commons Standing Committee on Finance along with Senior Deputy Governor Carolyn Rogers. Normally, his testimony is just a rehash of the monetary policy statement, but this time parliamentarian’s may ask him to clarify his recent remarks.
Last Wednesday, Mr Macklem sounded decidedly hawkish, even though he left interest rates on hold. At that time he said “our outlook for near term inflation is higher, noting that Higher energy prices, structural pressures in our housing market and stickiness in underlying inflation are all slowing the return to target.” He finished his opening MPR statement by saying “If inflationary pressures persist, we are prepared to raise our policy rate further to restore price stability.”
Those comments certainly point to further rate hikes. However, the next day in an interview with CBC Mr Macklem said “We’ve left the door open to further interest rate increases because inflation is proving persistent. But the evidence we’ve got in the last few months is giving us the confidence to be patient. Look, we may not have to raise interest rates further. You know, we’re seeing clearer evidence that higher interest rates, they’re moderating people spending in the economy. The economy’s not overheated anymore. And so we, you know, we do think there’s more inflation relief in the pipeline.”
In a nutshell, rates are going higher, unless they are not. Helpful-not really.
EUR/USD subtly increased within a range of 1.0547 to 1.0589 during a session that remained low-key due to a public holiday in Germany. Initial data for Germany’s third-quarter GDP indicated a 0.1% decrease quarter over quarter and a 0.3% year-on-year decline, both slightly better than anticipated. Nonetheless, these bits of positive news were counterbalanced by the Euro-area economic sentiment, which held steady at 93.3.
GBP/USD fluctuated between 1.2090 and 1.2140, driven by a somewhat improved risk sentiment that resulted in widespread US dollar selling. However, potential gains remain limited as the market anticipates the Federal Reserve and Bank of England meetings set to occur later in the week.
USD/JPY experienced a dip followed by a rebound, trading within a 149.28 to 149.82 range and settling near the upper end of this spectrum in early New York trading. With the Bank of Japan’s meeting on the horizon for tomorrow, potential adjustments to its Yield Curve Control policy could restrain any further gains.
AUD/USD reached the higher end of its 0.6332 to 0.6374 range, bolstered by a weaker US dollar and retail sales figures that exceeded expectations, reporting a 0.9% month-on-month increase compared to the forecasted 0.3%.