- Loonie climbs on broad US dollar weakness
- BoJ raises threat of intervention
- US dollar opens with steep losses, AUDUSD outperforms
USDCAD Snapshot open 1.2985-89, overnight range 1.2984-1.3093, close 1.3090, WTI oil $84.89, Gold $1727.77
The Canadian dollar climbed 1.2% overnight compared to Thursday’s NY open but that gain paled in the face of the Australian dollar’s 2% rally,
USDCAD traded at 1.3146 on Thursday and hit 1.2984 just before NY opened after Chinese data, and the Bank of Japan opened the US dollar selling flood gates.
China reported that August CPI cooled to 2.5% y/y in /August compared to 2.75% in July while the Producer Price Index dropped to 2.3% y/y form 4.2%. Even though the declines were due to China’s enhanced Covid protocols, it still improved risk sentiment.
It was comments from Senior Japanese officials and the Bank of Japan that got the ball rolling. Collectively, they expressed their unhappiness with the extent of yen weakness, with Chief Cabinet Secretary Matsuno blaming the moves on speculation. BoJ Governor Haruhiko Kuroda said he met with the Prime Minister to discuss economic developments.
However, the catalyst that sparked broad-based US dollar selling against USDJPY and the other G-10 major currencies was the Finance Minister saying he has 3.5 trillion yen at his disposal.
EURUSD rallied from 0.9940 to 1.0113 overnight and is trading just below the peak. The single currency is supported by yesterday's 75 bp ECB rate hike and predictions for a similar bump at the next meeting. Prices are supported by EU actions to reduce the impact of soaring energy prices; however, the money has to come from somewhere, and the Russia/Ukraine war is ending anytime soon. The EURUSD rally is merely a correction of an oversold market unless prices can decisively break above 1.0220.
GBPUSD climbed 1.1470 yesterday to 1.1647 in Europe before sliding to 1.1610 in NY. The GBPUSD rally is also a result of a short-squeeze due to broad US dollar weakness and the end of political uncertainty after Liz Truss became PM. However, further upside is limited as the UK faces a rash of economic problems.
USDJPY dropped from 144.15 to 141.51 overnight and is trading at 141.70 in NY. The elevated threat of intervention and the slide in the US 10-year Treasury yield fueled the plunge. Nevertheless, as long as US rates are going higher and the BoJ sticks to its yield curve control policy, capping the 10-year Japanese government bond yield at 0.25%, USDJPY has further upside.
AUDUSD rallied from 0.6749 to 0.6876 due to lower Chinese inflation data and rebounding commodity prices.
NZDUSD mirrored AUDUSD moves.
There isn't any top-tier US data, but a trio of Fed policymakers are delivering speeches.
