- Canadian retail sales data on tap
- Chinese Lunar New Year holidays begin Sunday.
- US dollar opens on mixed note, JPY and CHF underperform.
USDCAD snapshot: open 1.3463-67, overnight range 1.3444-1.3475, close 1.3468, WTI $80.85, Gold $1930.10
The Canadian dollar consolidated overnight, opening in New York where it closed on Thursday.
The Canadian dollar is poised to end the week in negative territory. It started today’s session 0.93% lower than where it opened on Monday, which is probably due to the weaker than expected Canadian inflation data raising speculation that the BoC could pause hiking rates next week
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A rate hike pause is not the base view. Most analysts and economists expect the BoC will hike rates 0.25 bp, followed by a somewhat dovish outlook.
Canada’s November retail sales report is due this morning and it is expected to show a 0.5%m/m decline. The results should not have any impact on USDCAD trading.
Global markets are finishing the weak on a cautious note, partly due to the annual US political theater surrounding the debt ceiling. Treasury Secretary Janet Yellen told Congress that the US hit the debt ceiling Thursday raising the spectre of a US debt default.
Wednesday, weaker-than-expected US retail sales and producer price data renewed fears that an “economic soft-landing” was becoming more unlikely which drove Wall Street stocks lower. Those losses were exacerbated after hawkish comments from Fed officials.
Asian markets were quiet with many traders getting ready for the Lunar New Year holidays. Chinese markets will be closed for the entire week.
Traders have also dialed back on their positive risk sentiment after the Chair of Russia’s Security Council seemingly threatened nuclear war if western weapons cause Russia to lose the war in Ukraine.
EURUSD had a modest bid in uneventful trading in a 1.0815-1.0858 range. Prices continue to be supported by expectations for another two 50 bps rate hikes by March.
GBPUSD is seeing some support from progress in UK/EU Brexit talks around Northern Ireland issues which underpinned prices in a 1.2338-1.2399 range. UK Retail Sales were weaker than expected in December, falling 1.0% m/m compared to forecasts for a 0.5% gain.
USDJPY rallied to 130.28 from 128.36. The gains were due to lingering disappointment following the BoJ meeting, when policymakers stuck to their dovish bias. Japanese inflation rose to 4.0% from 3.8% /yy.
AUDUSD and NZDUSD were rangebound and tracking broad risk sentiment.
The US data calendar is empty.
