- Oil prices fall after Iran suggests progress in talks with America
- US ISM Manufacturing PMI on tap
- US dollar slides on improved risk sentiment.
USDCAD open (6:00 am): 1.3975, overnight range 1.3950-1.3988, close 1.3975, WTI $99.61, Gold $3,898.72.
The Canadian dollar weathered last week’s drama and Friday’s equity market rout, managing to finish October up 1.85% against the greenback and comfortably claim top spot among the G-10 currencies.
The week ahead promises plenty of drama and potentially significant FX volatility. Two Fed officials, Dallas Fed President Lorie Logan and St. Louis Fed President Alberto Musalem, sounded hawkish on Friday, with Logan arguing that two additional 25 bp rate hikes may be necessary.
WTI fell sharply, sliding from Friday’s US$104.95 to US$99.34 on hopes of progress toward ending the US-Iran conflict. Iran’s foreign
minister reportedly suggested negotiations were advancing, while OPEC announced that production quotas would remain unchanged.
Markets are slightly optimistic. Tehran insists the Qatar-brokered talks are making headway, while Trump claims he hasn’t made up his mind about resuming attacks once the mid-terms are out of the way.
Asian bourses finished in the red, with China and Hong Kong the exceptions. Hong Kong’s Hang Seng added 0.42%, Japan’s Topix shed 0.88% and Australia’s ASX 200 slipped 0.58%.
At 7:20 am, European indices are spinning its wheels. The German DAX and UK FTSE 100 are flat and the French CAC 40 has added 0.18%. S&P 500 futures are up 0.43%, the DXY sits at 101.67, t and the US 10-year Treasury yields 4.912%.
EURUSD climbed through a 1.1149-1.1237 range, erasing all of Friday’s losses with room to spare as risk appetite perked up. Growing talk of a diplomatic exit from US-Iran hostilities pushed crude lower, which let European equities recover part of Friday’s rout and put a floor under the single currency. On Friday, Fitch caught Paris off guard by revising the outlook on France’s A+ rating to negative from stable, pointing to softer growth and deteriorating public finances, while Moody’s had earlier left its own France rating untouched.
GBPUSD carved out a 1.3380-1.3448 range, with Cable topping out during the European session after the final UK manufacturing PMI came in at 52.8. S&P Global Market Intelligence noted that output and new orders both picked up speed in October as firms responded to firmer demand at home and abroad. Thursday is the main event for GBPUSD traders, with the Bank of England expected to lift rates by 25 bps to 4.00%.
USDJPY ground through a narrow 157.44-158.00 band and is loitering near its overnight high in early New York trade, paying no attention to cheaper crude. The greenback’s appeal rests on the Fed’s recent rate hike and the hawkish chorus from some policymakers since, a sharp contrast to BoJ Governor Kazuo Ueda’s wishy-washy outlook.
AUDUSD stuck to a skinny 0.7008-0.7035 range, with the Aussie on the back foot even though markets unanimously expect the RBA to hike 25 bps to 4.85% tomorrow and worry that inflationary pressure could force more tightening down the road. The monthly inflation gauge rose 0.5% m/m in October.
Today’s Canadian calendar features the S&P Global Manufacturing PMI, expected to hold steady at 56. In the US, October’s ISM manufacturing PMI is expected to edge up to 54.7 from 54.5.
