- Fed Chair Powell speech Friday
- China cuts rates, underpins antipodean currencies
- US dollar stays bid to start the week
USDCAD Snapshot open 1.3019-23, overnight range 1.3008-1.3061, close 1.3053, WTI oil $91.94, Gold $1739.33
The Canadian dollar is struggling. The Loonie is under pressure due to broad-based US dollar demand on fears that Fed Chair Jerome Powell will stress the need for higher US interest rates, for a longer time than previously expected.
Those fears boosted Treasury yields and sank stocks.
However, the view is hardly universal. JP Morgan strategists think the Fed’s September rate hike will be 75 basis points but deliver a dovish statement. Other analysts agree and in a Bloomberg survey, predicted the S&P 500 would rally 3.5% from current levels by year end.
Asian markets are dealing with Fed concerns and worries about the health of China’s economy. The Peoples Bank of China cut the 1 and 5 year Loan Prime Rates on Monday in an attempt to kick-start slumping economic growth. They also announced CNY 200 billion of new loans for the troubled property development sector.
The Canadian dollar is seeing much, if any, support from oil prices. West Texas Intermediate climbed from $86.05 /barrel yesterday, to $92.16/b today after Opec threatened production cuts. Saudi Arabian Energy Minister Prince Abdulaziz bin Salman claimed there was a “disconnect” in the oil futures market. The cartel is upset that prices have fallen dramatically from the peak after Russia invaded Ukraine.
The FX market is trading erratically despite a lack of fresh economic or geopolitical news to fuel moves.
EURUSD is getting spanked, falling from 1.0200 last Wednesday, to 0.9901 today with widening Fed/ECB interest rate spreads, energy crisis hysteria, and speculative sellers driving prices lower. EURUSD support is at 0.9600.
GBPUSD is not faring much better than the single currency. GBPUSD dropped from 1.2130 on August 17 to 1.1719 in Europe today. Weaker than expected Manufacturing, Composite, and Services PMI data, weighed on prices, in addition to ongoing labour unrest and political uncertainty.
USDJPY rallied from 137.05 to 137.70 due to the 10-year US Treasury yield at 3.01% and fears of even higher yields if Powell delivers a hawkish speech Friday.
AUDUSD chopped in a 0.6858-0.6877 range. Prices fell after weaker than expected PMI data, but the losses were recovered by the NY open.
NZDUSD traded quietly in a 0.6162-0.6193 range.
Today’s US data is second tier and should not be a trading factor. The Canadian economic calendar is empty.
