- Hot US inflation sinks Loonie
- Wall Street Futures give back overnight gains ahead of US open
- US dollar consolidates yesterday’s losses, NZD underperforms
USDCAD Snapshot open 1.3162-66, overnight range 1.3150-1.3193, close 1.3175, WTI oil $87.89, Gold $1704.71
The Canadian dollar got slammed yesterday and is still on the canvas in early NY trading.
USDCAD probed support in the 1.2970 area yesterday as bearish traders expected to be rewarded with a weaker than forecast US inflation report. Alas, it was not to be.
August CPI rose 8.3% y/y (forecast 8.1%) and 0.1% m/m (forecast -0.1%, July 0). Even worse, Core CPI (which excludes food and energy) jumped 0.6% m/m, double the prediction. The reactions were swift and brutal.
Bond traders crushed bonds, sending the US 10-year yield from 3.30% to 3.45%, while equity traders knocked the Dow Jones Industrial Average down 1276 points. The S&P 500 index plunged 4.32%.
Commodity prices plunged. Gold (XAUUSD) dropped from $1731.60 to $1697.30 as fears of higher US rates took the shine off the precious metal.
West Texas Intermediate (WTI) fell to $85.20/b from $89.20/b but squeezed out some gains in the afternoon and consolidated in a $86.22-$87.97/b range overnight. Traders are concerned that higher US interest rates and ongoing coronavirus measures in China will curtail demand. However, Opec officials claim the physical and paper market has become disconnected, implying they may cut production to boost prices. EURUSD retraced all its post-ECB gains in one fell swoop yesterday, consolidated the losses with a modestly positive bias overnight, and opened at the top of its 0.9957-1.0023 range.
The outlook for sharply higher US interest rates has led to speculation that the ECB will need to be more aggressive to prevent a "weak Euro," importing inflation. EU Commission President Ursula von der Leyen said she plans a deep reform of the electricity market, a windfall tax on fossil fuel companies' profits, and a 5% mandatory peak power energy use reduction.
GBPUSD is attempting a rally after dropping from 1.1735 pre-US CPI to 1.1482 in Asia overnight.
GBPUSD climbed to 1.1571 after August CPI rose 9.9% in July (forecast 10.2% y/y) even though PPI and Retail Price Index data was softer than forecast. Traders are looking ahead to next week's Bank of England meeting and an expected 50 bp rate hike.
USDJPY spiked from 141.60 yesterday to 144.95 in Asia due to the US 10-year Treasury yield surge to 3.458% but retreated to 143.18 in NY on fresh threats of BoJ intervention.
AUDUSD and NZDUSD are almost unchanged compared to yesterday's NY close but well below Tuesday's peak levels.
NZDUSD was the worst performing currency losing 2.41`% since yesterday's NY open due to the belief that RBNZ rate hikes will lag those of the Fed.
US August PPI is expected to dip to 8.8% y/y from 9.8% in July.
