- US CPI expected to cool to 7.3% from 7.7% y/y
- Positive risk sentiment lifting stocks and sinking US dollar
- US dollar opens little changed from close then drifts lower in early NY trading
USDCAD snapshot open 1.3625-29, overnight range 1.3605-1.3642, close 1.3634, WTI $73.99, Gold $1787.54
The Canadian dollar is grinding out gains ahead of this morning’s US November inflation report.
BoC Governor Tiff Macklem did not provide much insight into last week’s monetary policy decision in a Vancouver speech late yesterday. The Governor echoed remarks given by Deputy Governor Sharon Kozicki on Friday. He stressed that future decisions would be data dependent
There are plenty of traders who are on the sidelines awaiting today’s US inflation data and Wednesday’s FOMC meeting. Those that are active are optimistic, at least the ones that blissfully ignore geopolitical issues.
Markets have embraced the “headline inflation is peaking” story which has helped lift bonds and drive the 10-year Treasury yield to 3.60% today. Traders are expecting Chinese demand for commodities to ramp up as covid-measures disappear. It has also knocked the US dollar off its peak levels.
That sentiment fueled Asian equity market gains, led by a 0.60% increase in Hong Kong’s Hang Seng index and a 0.31% rise in the Australian ASX 200 index. European bourses joined the party with a 0.80% rise in the German Dax leading the way. S&P 500 futures are up 0.63% as of 6:30 am ET.
But it is all noise. Traders are waiting to analyse the FOMC statement, Fed Chair Powell’s press conference, and the updated Summary of Projections before deciding a course of action for 2023.
EURUSD bounced erratically in a 1.0529-1.0560 range overnight. German inflation rose 10.0% y/y in November down from 10.4% in November. ZEW economic sentiment in German and the Euro zone was better than expected at -23.3 and -23.6 respectively. EURUSD will target 1.0800 on a break above 1.0600.
GBPUSD is near the top of its overnight 1.2250-1.2302 range boosted by data showing weekly earnings rose 6.1% (3 months, y/y) compared to 5.8% previously. The data supports the case for a 50 bp rate hike on Thursday.
USDJPY traded in a 137.33-137.98 range with prices underpinned by the rebound in the US 10-year yield to 3.61%.
AUDUSD climbed from 0.6742 to 0.6784 due higher Westpac Consumer Confidence which rose 3.0% a along with improved risk sentiment, higher commodity prices, and hopes China accelerates its reopening plans.
