– Forecast for US Core CPI (ex food and Energy) is unchanged at 4.1% y/y
– EU Economic sentiment improves-slightly.
– US dollar opens mixed after quiet overnight session.
USDCAD: open 1.3824-28, overnight range 1.3793-1.3843, close 1.3807, WTI $78.41, Gold, $1947.12
The Canadian dollar continues to be an after-thought in global FX markets. The currency continues to trade with a negative bias, but momentum studies suggest the downside pressure is waning and CME speculative positioning data shows that the Canadian dollar is very over-sold.
If today’s US October CPI report indicates inflation is moving lower, talk that the Fed will soon be cutting rates will become deafening. If so, the US dollar will slide and the Canadian dollar will get a lift.
Headline CPI is expected to fall to 3.3% y/y from 3.7% while Core-CPI is forecast to be unchanged at 4.1%. The core-data is the more important number, but traders will be looking for any component to suit their view.
WTI oil firmed slightly, climbing to $78.70 in European markets before dropping to $78.04 per barrel in New York. The International Energy Agency (IEA) revised its oil demand projections upward for 2023 and 2024, attributing this in part to the expanding Chinese petrochemical industry. Nonetheless, they cautioned that a potential market surplus could emerge in early 2024 as demand growth is expected to decelerate.
EURUSD traded in a 1.0692-1.0731 range with the peak occurring after the ZEW Economic Sentiment survey showed economic sentiment in the Eurozone improved sharply in November. (EU ZEW 13.8 vs previous 2.3). German economic sentiment moved into positive territory for the first time since April. Q3 GDP fell 0.1% q/q, as expected. The EURUSD intraday technicals are bullish above 1.0660 and looking for a break of 1.0760 to extend gains to 1.0850.
GBPUSD drifted in Asia then churned in Europe inside a 1.2265-1.2308 range before settling at 1.2291 when NY opened. Prices saw a bit of support after UK wage growth data slowed less than expected (actual 7.9%, forecast 7.3%) which some analysts suggest will encourage the Bank of England to leave rates unchanged. The intraday GBPUSD technicals are bullish above 1.2205, looking for a break of 1.2320 to target 1.2420.
USDJPY drifted in a 151.57-151.80 range overnight. Traders are jittery and anticipate BoJ intervention at any moment although yesterday’s plunge from 151.94 to 151.21, which occurred at 10 am, was more likely option expiry related, rather than BoJ intervention.
AUDUSD traded negatively in a 0.6360-0.6385 range mainly due to a weak Westpac Consumer Sentiment reading (actual 79.9 vs October 82), which economists blamed on the latest RBA rate hike.