– Canada Retail Sales ahead
– Central Banks in China and Japan leave rates unchanged.
– US dollar attempting to stem recent losses.
USDCAD: open1.3573, overnight range 1.3553-1.3577, close 1.3560, WTI $70.81, Gold, $2606.81
The Canadian dollar is consolidating yesterday’s gains with price action at the whim of prevailing US dollar sentiment. Trading may be extra-volatile today in and around the 10:00 am option expiry window. There are $530.0 billion worth of 1.3570-1.3575 strikes and $1.9 billion of 1.3580-1.3585 strike that mature at 10:00 am.
Before that, Canadian retail Sales data is released. They are expected to have rise by 0.6% m/m in July compared to 0.3% in June. The ex-autos component is expected to be unchanged at 0.3%. Sharply weaker than expected results would lead to speculation of a 50 bp Bank of Canada rate cut at the October 23 meeting as it would be further evidence of the deteriorating health of the economy.
It is triple witching day for equity markets. Today’s quarterly event sees about $5.3 trillion of stock, ETF and index options expiring at 10:00 am, which can roil equity markets and spill over into FX trading.
Asian equity markets followed Thursday’s S&P 500 record high with gains across the board. European bourses underperformed and all are around 0.63% lower. S&P 500 futures are down 0.32%. Gold (XAUUSD) gained $26.74 since yesterday’s close due to falling US rates and rising geopolitical tensions in the Middle East. The 10-year Treasury yield climbed from 3.673% to 3.735%.
EURUSD is choppy but remains confined within a 1.1152-1.1182 range, with prices buoyed by overall weakness in the US dollar. The uptrend that began in early August continues to hold as long as prices stay between 1.1030 and 1.1330.
The British pound is trading near the lower end of its overnight range of 1.3272-1.3341 after the Bank of England decided to keep interest rates at 5.0%. Governor Andrew Bailey’s remarks signaled caution against cutting rates too quickly, leading traders to anticipate no changes in the November meeting. Additionally, UK consumer confidence fell sharply to -20 from -13, a drop attributed by GfK to concerns over upcoming tax hikes.
USDJPY saw significant movement overnight, fluctuating between 141.74 and 143.96. The volatility was driven by the Bank of Japan’s decision to maintain its benchmark rate at 0.25%. Comments from Governor Kazuo Ueda, who emphasized the need for caution due to global economic uncertainties, contributed to the gains in USDJPY.
AUDUSD remained within a 0.6801-0.6830 range after the FOMC, though it’s currently trading near session lows in New York. Early support from USDCNY weakness faded as attention turned to the Reserve Bank of Australia’s meeting on Tuesday.
Canada Raw Materials Price and Industrial Product price indexes are on tap.