- Eurozone data warns of recession
- European equities and US futures reflect positive risk sentiment
- US dollar gives back some gains
USDCAD Snapshot open 1.2977-81, overnight range 1.2974-1.3024, close 1.3011, WTI oil $95.39, Gold $1733.82
The Canadian dollar retreated from the brink of the abyss yesterday and then consolidated the gains overnight. The rally had nothing to do with any domestic news or data, rather the gains followed S&P 500 price action.
The Canadian dollar is benefitting from broad -based US dollar selling pressures as portfolio managers rebalance their positions for month end, which is also occurring in thin, late summer markets.
West Texas Intermediate (WTI) rallied Monday and retreated Tuesday, but prices are still above Friday’s close. WTI is trading at the bottom of its overnight $93.99-$97.62/b range, partly due to profit-taking but downside is limited to concerns about supply disruptions. Prices got an added boost after Goldman Sachs analysts told clients to “buy commodities.” Traders are also concerned about the September 5 Opec meeting after Saudi Arabian officials warned production could be reduced.
Asian equity traders ignored Wall Street’s negative close and bought stocks. Australia’s ASX closed with a 0.47% gain while Japan’s Nikkei 225 index finished 1.14% higher. European bourses followed the Asia lead with the German Dax gaining 1.83%.
EURUSD is attempting to rally, rising from 0.9998 to 1.0054, mainly due to month-end flows. ECB Chief Economist Philip Lane suggests the Bank should raise rates at a “steady pace. The statement is seen as “pushback” to other ECB policymakers advocating 75 bp or higher hikes.
The Eurozone Economic Sentiment Indicator dipped to 97.6 from 98.9 in August, with industry and services sectors weakening.
GBPUSD rallied from 1.1689 to 1.1759, then slid to 1.1718 in NY. Month-end demand is lifting GBPUSD, but the reality of a UK recession and ongoing energy crisis capped gains. Credit Suisse economists predict UK inflation will peak at 15% in January 2023 (previous 13.2% peak in October) which also weighed on prices. The GBPUSD downtrend from August 11 is intact below 1.1800.
USDJPY consolidated yesterday’s gains in a 138.15-138.77 range, with prices underpinned by Fed/BoJ monetary policy differences.
AUDUSD and NZDUSD posted gains thanks to broad US dollar selling pressures.
Today’s US data includes Case-Shiller Home Price Index (forecast 19.5% y/y vs previous 20.5%), Consumer Confidence, and JOLTS Job openings.
Canada’s Q2 Current Account balance is expected to increase to $6.6 billion from 5.03 billion.
