- US government shuts down for 21st time since 1971.
- US ISM Manufacturing PMI due.
- US dollar opens with losses across the board.
USDCAD open 1.3926, overnight range 1.3907-1.3933, close 1.3921, WTI 61.87, Gold 3889.09
The Canadian dollar is under pressure despite broad US dollar weakness against the other G-10 currencies. The weakness reflects underlying domestic issues, as Canada has barely sidestepped an outright recession but continues to struggle with a weak labour market, sluggish retail spending, and a widening output gap that points to further Bank of Canada easing.
The Bank of Canada releases its Summary of Deliberations from the September 17 meeting today, which is expected to emphasize the fragile state of the economy and reaffirm the rationale for the most recent rate cut.
WTI oil prices traded in a 61.65-62.90 band. The market found some support after API reported a 3.67-million-barrel drawdown in US crude inventories.
The US government has shut down after Republicans and Democrats failed to agree on a funding deal. Federal services are being closed and hundreds of thousands of government workers have been placed on furlough.
The immediate impact is that several important economic releases, including weekly jobless claims and the nonfarm payrolls report, will be unavailable for the duration.
Asian equity markets finished lower, though Chinese markets were closed for the Golden Week holiday. Japan’s Topix dropped 1.37% following a mixed Tankan report, while Australia’s ASX 200 ended flat.
As of 7:10 am EDT, European stocks are higher with the UK FTSE 100 up 0.75%, the German DAX gaining 0.48%, and the French CAC-40 up 0.42%. S&P 500 futures are down 0.55%, the US dollar index is at 97.77, and the US 10-year yield is holding at 4.143%.
EURUSD traded in a 1.1730-1.1779 band but eased to 1.1740 in early New York trading. The release of September harmonized CPI, unchanged at 2.2% y/y and reflecting higher energy costs, was in line with forecasts. The short-term technical picture stays positive while above 1.1650.
GBPUSD firmed in a 1.3435-1.3480 range, climbing despite news that Manufacturing PMI fell to a five-month low of 46.2. The currency found support from strength in the FTSE 100, which set another intraday record high.
USDJPY fell from 148.23 to146.91 as broad US dollar weakness and renewed demand for safe-haven yen following the US shutdown weighed on the pair. The move was reinforced by the quarterly Tankan survey, which improved for the second consecutive quarter, signaling economic resilience and providing the BoJ with further justification for tightening policy.
AUDUSD bounced in a 0.6590-0.6620 range, with the pair supported by overall US dollar softness following the shutdown. Domestic data showed September’s PMI at 51.4, still signaling expansion but at a slower pace than the previous month.
ISM Manufacturing PMI is on tap.
