November 20, 2024
- Inflation causing problems for BoC and BoE
- Risk aversion fades due to lack of mushroom clouds in Ukraine.
- US dollar opens higher from close, mixed from yesterdays open.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3990, overnight range,1.3951-1.4000, close 1.3957
USDCAD dropped sharply after inflation, both headline and core rose a tad more than expected. The initial reaction was because analysts downgraded the odds of a 50 bp rate cut on December 11 to just 25 bps. Silly people. Governor Tiff Macklem previously warned that he expected the decline in inflation to be choppy, so yesterday’s increase was just a bit of chop. After all, CPI remains inside the BoC target range. Canada GDP is more crucial to the BoC decision and that data won’t be released until November 29. The losses were fully reversed overnight.
WTI oil prices inched higher, rising in a 69.16-69.92 range due to fears that Russian oil supplies could be disrupted due to escalating hostilities. However, the 4.75 million barrel increase in US crude stocks, reported by API, slowed the gains.
There is no Canadian economic data today.
USDCAD Technicals
The intraday USDCAD technicals are bullish with yesterdays drop to 1.3960 seen as merely a correction. A decisive move above minor resistance at 1.4100 targets 1.4060, then 1.4100.
Longer term, the technicals are unchanged. The USDCAD uptrend from September 26 (daily chart) is intact while prices are above 1.3930 and that level is guarded by the November uptrend line at 1.3980. The previous double top at 1.3960 is additional uptrend support.
For today, USDCAD support is 1.3960 and 1.3930. Resistance is 1.4010 and 1.4050
Today’s Range 1.3960-1.4060
Chart: USDCAD 4 hour
Source: Oanda.com
Inflation and Trump Driving Markets
Traders have forgotten yesterday’s fears of mushroom clouds blossoming across Europe and have turned their attention to inflation and US politics. UK inflation surprised to the upside, while Trump’s Cabinet picks continue to raise eyebrows and stir consternation. For example, Trump selected Matt Gaetz for Attorney General, and the man is under investigation by the Senate Ethics Committee. He picked a whack-a-doodle, Robert F. Kennedy Jr., to be Health and Human Services secretary, and he named a TV presenter as Defense Secretary. The Senate still needs to approve the selections.
Global Stock Indexes Rise
Equity traders are in a good mood and hoping for strong results from NVIDIA when the company reports after the close today. European bourses are all in positive territory, led by a 0.20% rise in the German Dax. S&P 500 futures are a little better than flat, while the US 10-year yield inched up to 4.43%. There aren’t any actionable economic reports from the US today, but there are plenty of Fed officials willing to offer opinions.
EURUSD
EURUSD dropped from 1.0610 to 1.0542 due to a combination of ECB/US interest rate differentials and yesterday’s dovish comments from ECB policymaker and Bank of Italy governor Fabio Panetta, who called for further interest rate cuts. The risk of the Russia/Ukraine war escalating is also weighing on the single currency.
GBPUSD
GBPUSD dropped from its Asian peak of 1.2715 to 1.2651 in early NY trading in the wake of a slightly hotter-than-expected inflation report. Headline CPI rose 2.3% y/y compared to the forecast of a 2.2% gain and 1.7% y/y in September. Core CPI rose to 3.3% from 3.2% y/y. The Retail Price Index rose 0.5% m/m, as expected, but well above the -0.3% in September. ING economists suggest that when you dive into the details, the results tell a different story—core services inflation fell.
USDJPY
USDJPY rallied steadily, climbing from 154.53 to 155.87, where it sits in early New York trading as traders unwound earlier safe-haven trades. Traders have dismissed Putin’s threat to use nuclear weapons as “posturing,” and reacted to the gains in US Treasury yields. The 10-year yield rose to 4.428% from 4.388%.
AUDUSD and NZDUSD
AUDUSD drifted lower in a 0.6501-0.6541 range after ongoing China growth concerns resumed overshadowing the RBA’s unchanged interest rate stance and relatively hawkish outlook after the minutes revealed more evidence that inflation is falling. NZDUSD mirrored AUDUSD moves and fell from 0.5922 to 0.58876.
USDMXN
USDMXN traded in a 20.0985-20.2195 range overnight and is near the top of that range due to broad US dollar gains, albeit small ones. USDMXN is trading with a modest bearish bias in a 20.0200-20.2300 band as traders digest last week’s somewhat dovish Banxico stance with an optimistic 2025 budget that includes growth targets between 2.0-3.0%.
BTCUSD (Bitcoin)
BTCUSD crawled higher in a 91,040-93,751 range overnight and is at the top of that band in NY. Prices have been rising since Trump won the election and are supported by rumors that a lawyer who represents blockchain companies, Teresa Goody, is being considered for the next SEC chair.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: 7.1935 vs exp. 7.2386 (prev. 7.1911)
Shanghai Shenzhen CSI 300 rose 0.22% to 3985.77
PBoC leaves rates unchanged: 1y LPR 3.10%, 5y 3.60%, as expected.
US threatens more sanctions after 45 prodemocracy activists were jailed for between 4 and 10 years.
Chart: USDCNY and USDCNH
Source: Investing.com
