- US Treasury yields below 5.0% and oil prices retreat from recent peaks.
- Five central bank meetings ahead this week
- Greenback opens modestly higher compared to Friday’s close.
USDCAD open (6:00 am): 1.4017, overnight range 1.3998-1.4044, close 1.4004, WTI $101.46, Gold $4,016.75.
The Canadian dollar saw a profit-taking sell-off in Asia but the pressure abated in Europe and prices have drifted higher into the NY open. Wednesday’s Bank of Canada announcement is the headline act, with markets pricing roughly 80% odds of a 25 bp hike to 2.50%. That begs the question-Why? The BoC is staring at its own CPI-trim and CPI median numbers of 1.8% and 1.9% respectively and they show no inflation problem as they sit in the middle of the 1-3% mandated inflation range.
WTI gapped lower at the open after Friday’s fears of fresh US strikes on Iran came to nothing. Houthi attacks on Saudi Arabia are putting a floor under prices, however.
FX markets are expected to be rather quiet today ahead of this week’s major risk events. Five major central banks are on tap beginning with The Reserve Bank of New Zealand (RBNZ), the Bank of Canada (BoC) and the Fed on Wednesday, followed by the European Central Bank (ECB) on Thursday and the Bank of Japan (BoJ) on Friday. At least the European and British policymakers will show up rested, having banked an extra hour of sleep when daylight saving time ended in Europe and the UK.
Wednesday also brings a second helping of risk as Alphabet, Microsoft and Amazon report Q3 results.
After three straight weekly declines, the US 10-year yield has slipped under 5% to 4.99%. As the gap between US yields and those in the rest of the G10 narrows, the dollar is quietly losing its lustre, and the Dollar Index sits at 101.78.
Asian stocks ended the session in positive territory, with Hong Kong’s Hang Seng leading the charge on a 0.51% gain. Japan’s Topix added 0.18% and Australia’s ASX 200 tacked on 0.17%.
As of 7:40 am, Germany’s DAX was up 0.83%, France’s CAC 40 had climbed 0.72% and the UK’s FTSE 100 was ahead 0.43%. S&P 500 futures had gained 0.13%, with the DXY at 101.88, and the 10-year Treasury at 4.99%.
Since then, US equity futures have edged up roughly 0.2%. The 10-year yields 4.988% and gold is at $4,017.59, steadying around the $4,000 mark after shedding almost 4% last week.
EURUSD is trading at its session low of 1.1193 after peaking at1.1227 in Asia. The single currency popped at the Asia open because of the news that Moody’s kept France’s debt rating unchanged.. Germany’s Ifo index beat expectations at 90.2, and the ECB is tipped to deliver a hawkish hold on Thursday.
GBPUSD is loitering near the low end of a 1.3344-1.3388 overnight band as traders opt for caution ahead of Wednesday’s UK Budget. The rumour mill has the government lining up a tax hike on bank profits and new rules making online retailers responsible for collecting VAT owed by third-party sellers.
USDJPY is pushing towards the top of its 156.65-157.37 overnight range when the yen shed its safe-haven bid as oil prices cooled. The BoJ is widely expected to keep rates at 1.25% on Friday, but Governor Ueda’s hawkish tone leaves a December or January hike on the table.
AUDUSD pushed higher within a tight 0.7022-0.7040 band, supported by hawkish remarks from RBA Assistant Governor Sarah Hunter. She cautioned that rates may need to go higher still, and a number of traders and analysts now see a hike as likely at the November meeting.
The Canadian calendar is bare today, and the US offers only the Chicago Fed National Activity Index.
