Canadian Dollar Update – Canadian dollar trades with bearish bias
USD/CAD Open: 1.3793-97, Overnight Range: 1.3796-1.3832, Previous Close: 1.3832
WTI Oil open at $85.25 and gold open at $1,985.83. US markets are mixed today.
For today, USD resistance is at 1.3889. Support is at 1.3857.
- US September PCE price index data ahead.
- Equity traders ignoring Middle East developments.
- US dollar opens mixed-Cad opens unchanged from Thursday’s open.
The Canadian dollar eked out a small gain overnight in an uneventful session. News that Amazon (AMZN: NASDAQ) earnings surpassed estimates gave global equities a boost, creating a ripple of positive risk sentiment. The Canadian dollar went along for the ride.
The Canadian dollar will remain under pressure because of Canada and US interest rate differentials, which have widened sharply this month, in favour of the US dollar. That’s because of divergent monetary policy outlooks between the Bank of Canada (BoC) and the Federal Reserve.
The BoC left its benchmark overnight rate unchanged at 5.0% at its meeting on October 25 and lowered its growth forecast for Q3 to 0.8% as the impact of rate hikes slows demand. Meanwhile, the US economy is percolating despite 500 bp of hikes in 19 months. US Q3 GDP grew 4.9% y/y, which was well above the 0.42% consensus forecast. That release coincided with the September Durable Goods Orders data, which rose 4.7% in September.
Both reports underscored the resilience of the US economy and pushed recession fears to the back burner.
Another key piece of US data, the September PCE price index report, is due today. Core PCE forecast is a rise of 0.3% m/m compared to 0.1% in August. A higher-than-expected result could trigger renewed US dollar demand.
EURUSD traded unenthusiastically in a 1.0552-1.0570 range. Yesterday’s ECB meeting was expected to be a non-event, and it was. The ECB left rates unchanged, and President Christine Lagarde’s press conference didn’t offer any insight. Many analysts believe ECB rates have peaked, which suggests the risk-reward for EURUSD is lower.
GBPUSD traded firmer in a 1.2112-1.2143 range mainly due to profit-taking after finding a bit of a bottom at 1.2074 yesterday. GBPUSD gains are limited due to robust US growth and caution ahead of next week’s Bank of England meeting.
USDJPY traded softer, falling from 150.43 to 149.97 due to mildly improved risk sentiment, yesterday’s drop in US Treasury yields, and because Tokyo inflation is getting hotter. CPI rose 3.3% in September compared to a 2.8% increase in August. The gain increased the odds that the BoJ will tweak monetary policy on Tuesday.
AUDUSD rose from 0.6320 to 0.6358, supported by the Producer Prices Index gaining 1.8% q/q, which reinforced calls for an RBA rate hike next month.