- Risk aversion returns
- Odds for Fed rate cut in December fall below 50%.
- US dollar consolidating yesterdays gains.
USDCAD open: 1.4039, overnight range 1.4018-1.4046, close, 1.4036, WTI 60.34, Gold 4168.04
The Canadian dollar consolidated yesterday’s losses and opened with a bearish bias due to the risk of higher US rates, for longer. The CME FedWatch tool suggests that the odds that the Fed will cut rates in December are less than 50% compared with 67% a week ago.
Canada Manufacturing Sales (forecast 2.8% m/m )and Wholesale Sales (forecast 0% m/m) are due.
WTI oil erased yesterdays gains and traded in a 58.73-60.65 range after Ukrainian drone strikes forced the closure of a major Russian oil terminal. Prices were also underpinned by renewed US dollar strength.
Traders are ending the week slightly risk averse as the initial optimism from the US government reopening fades into concern that questionable and incomplete data could push the Fed toward holding rates steady next month.
Comments from several Fed officials over the past two days reinforced that view, with St. Louis Fed President Alberto Musalem, Cleveland Fed President Beth Hammack, and Minneapolis Fed President Neal Kashkari all stressing the need for caution due to unreliable data and stubborn inflation.
Asian equity markets closed with broad losses. Hong Kong’s Hang Seng led the drop with a 1.57 % decline, followed by Australia’s ASX 200 down 1.36 % and Japan’s Topix slipping 0.65 %.
As of 7:35 am, European indexes were similarly underwater, with the FTSE 100 down 1.84 %, Germany’s DAX off 1.61 %, and France’s CAC 40 weaker by 1.59 %. S&P 500 futures are lower by 0.87 %, the US Dollar Index sits at 99.20, and the US 10-year Treasury yield is 4.05%.
EURUSD traded in a 1.1609–1.1649 range as the single currency digested earlier gains linked to the US government’s reopening. Eurozone employment, trade, and Q2 GDP numbers barely moved the needle, with traders preoccupied by what the Fed might do next.
GBPUSD traded in a 1.3101–1.3201 band during a chaotic session fueled by duelling leaks and rumours ahead of the November 26 budget. The pair hit its low on suggestions that Chancellor Rachel Reeves and Prime Minister Keir Starmer were retreating from plans to scrap income tax hikes. A later rumour that the OBR delivered better fiscal projections sparked a rebound. The truth arrives on budget day; until then, traders are flying blind.
USDJPY traded in a 154.31–154.77 range as the pair steadied after Thursday’s pullback. Analysts doubt that the Takaichi government has any appetite for FX intervention, arguing that depleting reserves now could leave Japan exposed if US tariffs intensify.
AUDUSD traded in a 0.6505–0.6550 range and is parked near session lows after giving back Thursday’s gains. Renewed demand for the US dollar, a wave of profit taking, and a cautious tone heading into the weekend are weighing on the currency.
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