Canadian Dollar Update – Canadian dollar awaiting CPI
USD/CAD Open: 1.3703-08, Overnight Range: 1.3700-1.3732, Previous Close: 1.3724
WTI Oil open at $77.57 and gold open at $1,988.77. US markets are lower today.
For today, USD resistance is at 1.3730. Support is at 1.3667.
- Canadian inflation expected to have cooled in October.
- FOMC minutes due at 2:00 pm ET.
- US dollar opens mixed after quiet overnight session.
The Canadian dollar traded quietly and opened near the bottom of its overnight range. Traders are awaiting today’s inflation report and hoping it will provide further insight into the Bank of Canada’s intentions for interest rates.
The Federal government has been flayed in the press after Scotiabank economists published a report blaming unchecked government spending for 200 basis points of interest rate hikes. That may force Finance Minister Chrystia Freeland to temper her new spending announcements when she delivers the Fall Fiscal Update today. But don’t hold your breath. Her boss, Prime Minister Justin Trudeau, famously said, ‘I don’t care about monetary policy.’
Canada’s October inflation is expected to have cooled to 3.2% y/y from 3.8% in September. It makes a nice headline, but the reality is that BoC officials care far more about their inflation metrics, CPI-trim and CPI-median. The most important one is CPI-median. It measures ‘core inflation corresponding to the price change located at the 50th percentile (in terms of the CPI basket weights) of the distribution of price changes in a given month.’
If CPI-median is 3.8% or higher, it will raise fears that the BoC will raise rates at the December 6 meeting, and that could give the Canadian dollar a lift.
For Fed watchers, the FOMC minutes are the only game in town today. There are no top-tier US economic reports, which leaves the October Existing Home Sales data (forecast at 3.9 million, compared to 3.96 million in September) and the Chicago Fed National Activity Index to spark some action.
EUR/USD meandered in a 1.0936-1.0966 range while maintaining a bullish bias due to hopes that the greenback has peaked for the time being. Bloomberg reports that the EU may place France on a ‘fiscal watch’ list, while Germany and Italy will be deemed ‘not fully compliant.’ It sounds like busy work, as the EU is France and Germany—the other 25 members are second-tier.
GBP/USD drifted in a 1.2500-1.2554 band, garnering a bit of support from yesterday’s somewhat hawkish comments by Bank of England officials. Governor Andrew Bailey repeated that it was ‘sensible to keep rates where they are,’ while Deputy Governor Dave Ramsden said, ‘I would not rule out having to raise Bank Rate further.’
USD/JPY continued to slide, falling from 148.41 to 147.15 as traders embrace the idea that US rates have peaked, and the Bank of Japan will soon be tightening.
AUD/USD inched higher in a 0.6553-0.6587 range due to mildly improved risk sentiment and broad US dollar weakness.