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USD / CAD - Canadian dollar faces off against the Fed

- Canadian growth data could give Loonie a lift.

- IMF raises global growth outlook.

- US dollar recoups some losses overnight-AUD underperforms.

USDCAD: open 1.3428-32, overnight range 1.3397-1.3433, close 1.3399, WTI $77.00, Gold, $2037.32

The Canadian dollar attempted another rally yesterday, but it failed partly because of stronger than expected US data. The JOLTS job openings survey showed openings rose unexpectedly to the highest level in three months even as fewer workers quit their jobs. Analysts suggested that it is a sign that workers are cautious in the face of widespread layoffs among major corporations which include UPS, Amazone and Microsoft.

The JOLTS data also suggests that the Fed may be slower to reduce interest rates than expected although bond traders don’t seem to share that view. The US 10-year yield dropped from 4.10% yesterday to 4.02% today.

Canadian dollar traders are focused on the upcoming November GDP data. The consensus forecast is for a gain of 0.1% compared to flat in October. The IMF is bullish on Canada and raised its 2024 growth rate to 1.4% which is a more optimistic view than the Bank of Canada’s 0.8% prediction. One noted Canadian economists asks if the BoC’s forecasts for weak growth is an attempt to make it’s management of the domestic economy look more effective.

If November GDP surprises to the upside it will give the Canadian dollar a boost on the assumption that the BoC could keep interest rates unchanged for longer than expected.

The FOMC is universally expected to leave rates unchanged and will likely acknowledge that the next rate move is a cut, but unfortunately, the timing of such a move is uncertain. Naysayers point out that if the economy is still expanding with a robust labor market, then why should the Fed cut rates at all?

EURUSD see-sawed in a 1.0806-1.0848 range which is almost identical to yesterday’s band with traders on hold until the Fed meeting.

GBPUSD drifted in a 1.2666-1.2703 range and is tracking EURUSD moves. It got a bit of support from higher than expected Nationwide Housing Prices.

USDJPY traded in a 147.19-147.50 range and is near the top of that band. Prices were underpinned after the BoJ’s Summary of Opinions showed policymakers still had a dovish bias.

AUDUSD traded in a 0.6559-0.6604 range. The low was seen in Asia after Australian inflation dropped sharply in December (actual 3.4% y/y vs November 4.3%) leading to speculation that the RBA will need to cut rates sooner than expected. Prices recovered to 0.6580 in early NY trading.

US ADP employment and Chicago Purchasing Managers Index are ahead.