The Canadian dollar rally stalled yesterday, and prices consolidated overnight. USD/CAD was $1.2406 in Europe on Monday, and prices slid steadily due to improved risk sentiment and broad U.S. dollar selling. The currency pair found a bottom at $1.2310 yesterday and bounced to $1.2376. Prices consolidated in a $1.2337-$1.2366 range overnight, with Canadian inflation data taking centre-stage this morning.
Canada Consumer Price Index is expected to have risen 0.1% m/m in September, a tad slower than the 0.2% m/m result in August. The results are distorted by supply-chain disruptions, which is why the Bank of Canada insists inflation increases are "transitory."
The Canadian dollar may get a boost if CPI rises higher than expected as it would increase speculation the BoC will need to raise interest rates sooner than anticipated. Weaker-than-expected results would drive the Canadian dollar lower.
The Canadian dollar continues to benefit from the rise in crude prices and predictions that the demand/supply imbalance will continue into Q1 2022. West Texas Intermediate (WTI) prices dropped from $83.70/b to $82.20 in New York, weighed down by fears of rising U.S. crude inventories.
The American Petroleum Institute said crude inventories rose 3.3 million barrels last week and Energy Information Aagency data is released today.
U.K. economic data, including inflation, knocked GBP/USD lower. Headline CPI rose 0.3% m/m compared to 0.7% previously and rose 3.1% y/y vs 3.2% in August. Retail Sales rose 0.4%, down from 0.6% in August. GBP/USD dropped from $1.3813 to $1.3753 in early New York trading as the results alleviated some pressure for the Bank of England to raise interest rates.
EUR/USD chopped about in a $1.1618-54 range as rising Treasury yields capped gains. U.S. Treasury yields climbed to 1.677% from 1.594% in Asia before easing to 1.634% in New York. Prices gains were checked on concerns about the impact of the ongoing Euro area energy crisis on growth. The doves at the European Central Bank feel empowered as noted hawk Bundesbank President Jens Weidmann announced he was stepping down on December 31.
USD/JPY extended recent gains and touched 114.69 with the jump in Treasury yields but retreated to 116.38 in New York.
AUD/USD added to yesterday’s gains thanks to steady to higher commodity prices. NZD/USD gained as traders anticipate the Reserve Bank of New Zealand will hike interest rates again in November.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
