Canadian Dollar Update – Canadian dollar drops after BoC pauses
USD/CAD Open: 1.3793-97, Overnight Range: 1.3790-1.3821, Previous Close: 1.3798
WTI Oil open at $84.72 and gold open at $1,990.83. US markets are lower today.
For today, USD resistance is at 1.3838. Support is at 1.3820.
- No support for Canadian dollar from BoC decision.
- US Q3 GDP and ECB rate decision ahead.
- US dollar grinds higher with rising Treasury yields.
The Canadian dollar came under pressure yesterday and continued to slide overnight. The losses were entirely due to developments in the US, with the Bank of Canada (BoC) monetary policy decision and quarterly Monetary Policy Report only playing a minor role.
The BoC did not deliver any surprises. They left interest rates unchanged at 5.0% and gave in to reality when they downgraded their Q3 GDP forecast to 0.8% from the 1.5% predicted in the July MPR.
Mr. Macklem sounded pretty proud of himself when he said, “We held our policy rate steady today because monetary policy is working to cool the economy and relieve price pressures, and we want to give it time to do its job.” However, it sounds like he would be happier if inflation fell faster. He complained that “Near-term inflation expectations and corporate pricing behavior are normalizing only gradually, and wages are still growing around 4% to 5%. The Bank’s preferred measures of core inflation show little downward momentum.”
The Canadian dollar sank when the statement was released, but the drop was just a coincidence as the market was focused on Wall Street stocks and soaring Treasury yields.
The US 10-year Treasury yield jumped to 4.959% from a low of 4.806% yesterday, and opened little changed this morning as US Q3 GDP, Durable Goods orders, and weekly jobless claims are in the spotlight. The consensus forecast for GDP is 4.2%, which is double the Q2 result, and some economists are suggesting today’s data may surpass the forecast.
EURUSD is at the bottom of its overnight 1.0532-1.0575 range, due to expectations for a dovish European Central Bank (ECB) monetary policy decision and press conference this morning. The ECB is expected to leave rates unchanged at 4.0% with expectations for a dovish ECB monetary policy outcome adding to negative price pressures from the Fed rate outlook and strong US data. The ECB will leave rates unchanged at 4.0% and deliver very oblique forward guidance.
GBPUSD traded negatively in a 1.2069-1.2113 range, with prices under pressure due to bearish technicals and widespread US dollar demand.
USDJPY traded in a 149.90 to 150.79 range overnight, with gains fueled by the rise in US Treasury yields. The Bank of Japan did not intervene.
AUDUSD traded with a mild bid in a 0.6270-0.6316 range overnight, garnering some support after Westpac Bank predicted another RBA rate hike next month.