- More US inflation data ahead-Core-PPI expected unchanged
- Oil prices are steady despite contradictory comments from White House
- US dollar traded narrowly but with a bid.
USDCAD open (6:00 am): 1.4263, overnight range 1.4249-1.4269, close 1.4257, WTI $88.25, Gold $3,891.72.
The Canadian dollar continues to be pressured by a run of soft Canadian data, which suggests the Bank of Canada will sit on its hands at the next meeting no matter how hawkish Governor Macklem sounds. Meanwhile, in the US the interest rate debate is not about pausing but about how many rate hikes are on the agenda.
WTI swung through an 87.85-89.20 range as traders tried once again to decode the latest batch of mixed messages from the White House. Trump now says Washington can manage without an Iran deal. On the demand side, US crude and fuel stockpiles unexpectedly grew, a sign that nobody is exactly burning through barrels. Prices still have a cushion underneath them thanks to Houthi attacks on Saudi oil facilities and Iranian claims, so far unconfirmed, that tankers have been struck in the Strait of Hormuz.
The 8:30 am ET producer price report is the highlight of the day. Economists have penciled in a 0.4% monthly rise for the headline index, a fraction of the previous 1.3% surge. Strip out the volatile bits and the core reading should ease to 0.3% from September’s 0.7%, keeping the annual core pace parked at 5.0%. The odds of a 50 bp December hike are 12.6% which would rise quickly on an upside surprise.
Plenty of Fed officials are queued up to offer their two cents once the data drops. They include: Vice Chair Philip Jefferson, Michelle Bowman, Boston Fed President Susan Collins, and San Francisco Fed President Lorie Logan
Asian bourses finished on a mixed note. Hang Seng dropped 1.55%, Australia’s ASX 200 shed 0.71%, while Japan’s Topix bucked the trend with a 0.11% uptick.
As of 7:30 am, the German Dax, the French CAC-40 and the UK FTSE 100 indices are flat while US S&P 500 futures have squeezed 0.25% higher. The US 10-year yield is 5.139%, and the DXY is 103.28
EURUSD dipped in a 1.1048-1.1073 band as greenback demand was steady, supported by the yield advantage of US assets over Europe.
GBPUSD was adrift in a 1.3221-1.3244 range. The UK economic data calendar is empty today, so nothing is slowing demand for greenbacks. Britain’s red-hot GDP report yesterday barely dented the dollar’s appeal, which is fueled the outlook for higher interest rates due to inflation worries and last week’s robust jobs data.
USDJPY traded quietly in a 159.67-160.19 range. Satsuki Katayama, Japan’s finance minister, once again promised an appropriate response to currency volatility which traders ignored since dollar strength is driving this move far more than anything happening in Japan. USDJPY downside was supported by comments from BoJ board member Taichi Asada, who cautioned against tightening at too brisk a pace.
AUDUSD carved out a 0.6784-0.6815 range and has dropped 2.03% against the greenback since Monday, worse than any other G10 currency. Zoom out to the full year, though, and the Aussie is the lone G10 member showing a gain, up 1.80%. Markets are pricing a rate cut next year in Australia and nowhere else in the G10.
Today’s Canadian data includes Manufacturing Sales for September (forecast 0.1% m/m, August 1.5%) and Wholesale Sales (forecast 0.5%, August -1.6%).
