– Canadian economy expected to have grown just 0.1% in October.
– Christmas holidays kick-off in earnest this week
– USD trading with a bid of a bid to start the day.
USDCAD: open 1.4399, overnight range,1.4349-1.4402, close 1.4378, WTI $69.25, Gold, $2619.51
The Canadian dollar is heading into the last days of 2024 with a very negative bias, and it is trading very near to its 2024 low.
December has not be kind to the loonie. The Bank of Canada set the tone by slashing its benchmark rate by 50 bps for the for its second consecutive reduction. Post-rate cut remarks by Governor Tiff Macklem did not help. He hinted that further rate cuts might be on the horizon due to ongoing economic weakness. Adding to the turbulence, Donald Trump announced plans to impose an additional 25% tariff on all Canadian imports, citing perceived weaknesses in border security. Traders scrambled to sell Canadian dollars.
Then things got worse. Finance Minister Chrystia Freeland suddenly resigned just hours before she was to table the Fall Economic Statement. She apparently balked at blowing up the budget deficit from $40 billion to $60.1 billion. She argued that increasing the budget deficit by 50% for questionable political purposes would undermine the government’s ability to address a potential trade war.
The situation was further aggravated by a more cautious-than-anticipated outlook from the FOMC who downgraded its outlook for 2025 rate cuts to just two from the four projected in September.
Looking ahead, Canada GDP is expected to rise 0.1% m/m in October. The BoC Summary of Deliberations from December 11 are due today.
Donald Trump is stirring up another hornets nest. This time a tweet on Truth Social claiming that the US will annex the Panama Canal due to its excessive fees charged to US shipping.
EURUSD moved sideways during the Asian session before declining from 1.0446 to 1.0389 in European trading, influenced by dovish comments from ECB President Christine Lagarde. She indicated that the 2.0% inflation target was within reach but expressed some concern about persistently high inflation levels. The potential for additional ECB rate cuts, driven by the lingering risk of Trump-imposed tariffs, is capping EURUSD gains.
GBPUSD fell to 1.2530 from 1.2588 following weaker-than-expected economic data. November Retail Sales showed a modest increase of 0.2%, falling short of the 0.5% forecast, while UK GDP data revealed stagnant growth in Q3 and a downward revision of Q2 GDP to 0.4%.
USDJPY is trading near the upper end of its 156.34-156.93 range. Gains are supported by a relatively dovish stance from the Bank of Japan compared to the slightly hawkish outlook of the Federal Reserve.
AUDUSD traded within a narrow range of 0.6241-0.6266, with a bearish tone due to concerns about US tariffs and slow economic growth in China, which continue to weigh on sentiment.
Merry Christmas and Happy New Years from all of us at Knightsbridge Foreign Exchange. This is the last daily update until January 2, 2025.