– M&A flow may be weighing on Loonie.
– FOMC minutes on tap
– US dollar opens directionless ahead of inflation
USDCAD: 1.3666, overnight range 1.3643-1.3675, close 1.3648, WTI $74.22, Gold, $2617.78
The Canadian dollar continued to tick lower overnight even though CAD/US 10-year interest rates spreads widened. The selling pressure may be coming from speculation of a massive outflow of Canadian dollars if Alimentation Couche-Tard is successful with their US dollar $47 billion bid for Seven and I Holdings of Japan. Quebec’s Caisse De Depot is backing the Couche-Tard bid.
The Reserve Bank of New Zealand slashed its Overnight Cash Rate (OCR) by 50 bps to 4.75% overnight. The move was widely expected by the comments suggested and other sizeable cut may be in the cards. The statement may provide some insight into the Bank of Canada’s statement on October 23. The RBNZ is concerned “that increasing excess capacity is leading to lower inflationary pressure in part because of low productivity growth, but mostly due to weak consumer spending and business investment.” Sound familiar?
WTI oil prices dropped to 73.09 from 74.02 overnight, partly due to the American Petroleum Institute reporting that US oil inventories rose by 10 million barrels last week. In addition, Israel’s failure to retaliate against Iran has led to diminished concerns about oil supply disruptions.
The Fed releases the minutes from its September 18 meeting when the cut interest rates by 50 bps. That story is old news now and many Committee members have remarked on the deliberations since the meeting which suggests the minutes will not offer any fresh insight.
EURUSD is stuck within a narrow 1.0951-1.0982 range, with traders largely indifferent to Germany’s increased trade surplus, which rose from €16.8 billion to €22.5 billion.
GBPUSD traded uninspiringly in a 1.3056-1.3106 range, as both the US and UK lack market-moving data. Even today’s FOMC minutes release isn’t expected to stir much interest ahead of Thursday’s US inflation figures and Friday’s UK data deluge.
USDJPY traded higher in a 148.01-148.74 range, reaching 148.66 in New York. The yield on the US 10-year Treasury remains firm at 4.02%, contrasting with growing speculation that the Bank of Japan won’t raise rates in 2024, with a January hike still uncertain. The technical outlook shows little resistance between 149.70 and 153.70.
AUDUSD moved erratically but with a slight upward bias in a 0.6723-0.6762 range. Support came from AUDNZD demand following the RBNZ’s 50 bp rate cut, and speculation about a potential Chinese fiscal stimulus over the weekend. Tomorrow’s Australian consumer inflation expectations data will be closely watched.
There are no US or Canadian economic reports of note today.