- New UK PM gives GBPUSD a lift
- RBA hikes 50 bps, as expected
- US dollar opens, mixed from Friday, CAD outperforms
USDCAD Snapshot open 1.3126-30, overnight range 1.3099-1.3143, close 1.3143, WTI oil $86.75, Gold $1711.63
The Canadian dollar has traded sideways since Friday and stayed inside its well-defined USDCAD 1.3000-1.3200 range. Despite its lackluster performance, USDCAD outperformed its antipodean peers despite the Reserve Bank of Australia hiking rates.
Traders shrugged off oil drama. Russia shut down the Nord Stream 1 pipeline in retaliation for the G-7 agreeing to a price cap for Russian oil. Euro area politicians were expecting such a move and had already taken steps to mitigate the energy shock. It is still a nasty move, leaving Europeans to bear soaring energy costs while India and China sop up heavily discounted Russian crude.
Opec did its part to tacitly support Russia while turning the screws on Europe. The Cartel, led by Saudi Arabia, decided to cut crude production by 100,000 barrels/day beginning October 1. The move offsets the 100,000 barrel/day increase that was announced in August and started September 1. The action is mostly an insult directed at the US, as 100,000 b/day is just a rounding error in the 100 million b/day global production.
The move was supposedly designed to shore up prices and help offset reduced demand due to slowing global growth. It’s not working. West Texas Intermediate jumped to $90.35/b Monday following the Opec announcement but has dropped to $86.22/b in NY today.
EURUSD is clawing back its losses following the pipeline closure announcement. The single currency plunged from 1.0035 Friday to 0.9878 yesterday, then rallied to 0.9986 in Europe. Prices have since retreated to 0.9918 as a rash of weak Euro area data underscores the negative economic outlook.
GBPUSD rallied from Monday’s low of 1.1448 to 1.1608 due to a wave of “short covering” following news that Liz Truss will become the latest UK Prime Minister. The result was widely expected, and prices have retreated on the reality of diverging US and UK growth prospects.
USDJPY soared to 142.10 from 140.26 as traders taunted the Bank of Japan for its 0.25% cap on 10-year Japan Government Bond yields. The BoJ is defiantly dovish in the face of rising interest rates globally.
AUDUSD rallied to 0.6831 after the Reserve Bank of Australia raised interest rates by 0.50%. The move was expected, but a dovish statement less so, and AUDUSD was sold.
Today’s data includes ISM Services PMI.
