- Markets mildly risk positive in low volume trading
- S&P 500 futures attempting to rally
- US dollar opens lower compared to Friday
USDCAD snapshot open 1.3623-28, overnight range 1.3591-1.3624, close 1.3612, WTI $76.91, Gold $1812.79
The Canadian dollar traded sideways in a quiet overnight session. The focus is on today’s Canadian inflation report.
Canada November CPI is expected to have risen 6.7% y/y; a tad lower than the 6.9% result in October. Core-inflation, which excludes 8 volatile components and is the main focus for Bank of Canada policymakers, is forecast to jump to 6.4% y/y from 5.8%.
If the core result is as estimated, it would spark a debate as to whether or not the BoC will be forced to hike rates at the January 25 meeting. BoC officials suggested that they may pause raising rates after the December 0.50% hike, saying future increases would be data dependent. A hot core-inflation reading is the kind of data that would trigger a rate increase.
However, there will be another CPI report on January 17, a week before the first BoC monetary policy meeting of 2023 and it may mitigate the impact from today’s results.
Traders ignored better than expected Canadian retail sales data yesterday because the gains were due to higher prices. In addition, Statistics Canada expects November retail sales will fall 0.5%.
WTI oil prices are near the top of its overnight $75.83-$77.92/barrel range due to a mix of broad US dollar weakness and lower than expected US crude stocks. The American Petroleum Institute reported inventories fell 3.065 million barrels in the week ending December 16. Nevertheless, gains are limited because of fears rising covid cases in China will slow global demand.
Global equity indexes are attempting to claw back some of the recent losses. In Asia, Australia’s ASX 200 index closed with a 1.29% gain.
Japan’s Nikkei continued to feel the effects from the Bank of Japan’s decision to raise its yield curve control band to +/- 0.50% from +/- 0.25%. The index closed with a loss of 0.66%.
European bourses have squeezed out gains, largely due to profit taking. The French CAC index is leading the rush with a 1.01% gain while the German Dax has risen 0.74%. S&P 500 futures are 0.39% higher.
The US 10-year Treasury yield drifted in a 3.677%3.72% range overnight, consolidating gains following the BoJ action.
EURUSD traded quietly in a 1.0608-1.0637 range with trades ignoring better than expected German Consumer Confidence.
GBPUSD fell to 1.2095 from 1.2195 due to economic damage concerns from striking workers and news that government borrowing in November was a record £22.0 billion in November.
USDJPY bounced in 131.51-132.37 range, consolidating losses from the BoJ’s surprise increase of the 10-year JGB yield band.
NZDUSD underperformed and traded negatively in a 0.6288-0.6349 range due to weaker than expected November trade data and consumer confidence.
US Consumer Confidence and Existing Home Sales data is ahead.
