USD/CAD Open: 1.3334-38, Overnight Range: 1.3325-1.3354, Previous Close: 1.3333
WTI Oil open at $74.87 and gold open at $2,035.81. US markets are lower today.
For today, USD resistance is at 1.3407. Support is at 1.3320.
The Canadian dollar is consolidating yesterday’s gains following another subdued overnight session. On Tuesday, Statistics Canada released the November inflation report. Headline CPI was unchanged at 3.1% compared to the consensus forecast for just a 2.9% y/y rise. Core-CPI was worse. It rose 3.5% compared to a 3.4% increase in October.
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Traders were caught off-guard, especially those expecting the Bank of Canada to cut rates in March. The inflation results put a damper on that view and some analysts suggested that policymakers may increase rates. That speculation gave the Canadian dollar a boost, but the gains are not likely to last.
The BoC is very unlikely to resume tightening, especially as the rest of the major G-10 central banks are in easing mode. In addition, BoC policymakers would face a lot of heat from government officials who are already being blamed for adding to inflation woes by overspending and levying carbon taxes.
Asian equity indexes closed on a positive note, led by a 1.37% rally in Japan’s Nikkei 225 index. European bourses have turned cautious and are trading around flat, except for the UK FTSE 100 index, which has bounced 0.66% following a weak UK inflation report. S&P 500 futures are down 0.16%, and the US 10-year Treasury yield is 3.89%.
EUR/USD drifted lower overnight, falling from 1.0985 to 1.0939 in early New York trading. Gains were limited due to central bankers warning that rate cut speculation was overdone.
GBP/USD got spanked and dropped to 1.2648 from 1.2737 following weaker than expected inflation data for November. The headline CPI rose 3.9% year-over-year, sharply lower than the 4.4% expected and October’s 4.6% result. The core CPI dropped to 5.1% year-over-year from 5.7% previously. Forget rate hikes. Traders are now pricing in 140 basis points of rate cuts in 2024, with the first cut occurring in March.
USD/JPY traded lower, in a 143.26-144.10 range. Traders are still adjusting positions after they were disappointed by the BoJ monetary policy decision, and they ignored Japanese trade data.
AUD/USD drifted in a 0.6748-0.6777 range, consolidating recent gains at levels last seen in July. Prices are getting a bit of support following the RBA monetary policy minutes that left the door open for another rate hike.
US consumer confidence data is due.
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