December 5, 2024
- Euro shrugs off French Prime Minister’s resignation.
- Powell says Fed can be patient
- US dollar opens slightly softer
FX at a Glance
Source: IFXA/RP
USDCAD open 1.4059, overnight range,1.4055-1.4080, close 1.4074
USDCAD is an after-though in global FX markets and was largely ignored overnight. The focus is on the US and the Canadian dollar’s vulnerability to new Trump Tariffs. USDCAD continues to be underpinned by CAD/US interest rate differentials with the 10-year yield spread at -111.7 bps.
Canada’s employment report is due tomorrow and expected to show a gain of 25,000 jobs and an increase in the unemployment rate to 6.6% from 6.5%.
Canadian politicians are embracing the Season of Giving. The Federal Minister for Pacific Economic Development graciously accepted free Taylor Swift tickets from a crown corporation (BC Pavillion Corporation). The gift likely violates the Conflict of Interest Code for Members of Parliament as Floor tickets,( row 28 Seat 11 and 12) are offered on StubHub for $6,029.00 each. A $1500 charitable donation hardly makes it ok. Mr Sajjan must have felt obligated to accept the largesse because he told reporters “This is actually supporting a very good cause, something that Taylor Swift also supports as well.” I guess he figures that he is the good cause.
WTI oil prices are at the bottom of its 68.00-69.08 overnight range. Reuters is reporting that Opec and friends have agreed to delay planned production hikes until April 2025. Traders ignored the news.
Canadian data deficit narrowed to $0.92 billion from 1$1.26 billion in September
USDCAD Technicals
The intraday technicals are unchanged from yesterday. They are bullish above 1.4030 and looking for a break above 1.4090 to extend gains to 1.4150. A move below 1.4030 targets 1.4010, then 1.3980.
Longer term, uptrend line from June 2021 is intact while prices are above 1.3460 and that level is guarded by support at 1.3860 and 1.3960. The move above 1.3980 opens up a new 1.3880-1.4170 range and that is likely to be the case until Trump’s inauguration.
For today, USDCAD support is 1.4030 and 1.4010. Resistance is 1.4090 and 1.4130.
Today’s Range: 1.4030-1.4120.
Chart: USDCAD daily
Source: Investing.com
Patience is a Virtue
Fed Chair Jerome Powell appeared to push back against the market’s belief that the FOMC will cut rates by 25 bps on December 18. Powell emphasized that the Fed began cutting rates in September to signal support for the labor market if it showed signs of weakening. He noted the economy is stronger than anticipated and added, “The good news is that we can afford to be a little more cautious as we try to find” a rate-setting that neither spurs nor slows growth. However, FX traders seemed to dismiss his caution, and the US dollar is modestly lower across the board.
Jobless Claims Rise
Weekly jobless claims rose by 9,000 from last week’s upwardly revised 215,00 level. The news put a bit of selling pressure on the greenback.
EURUSD
EURUSD climbed from 1.0507 to 1.0547, shrugging off news that French Prime Minister Michel Barnier lost a non-confidence vote—the first such loss in over 60 years. Barnier is expected to tender his resignation today, but the news was fully priced in and did not surprise markets. The euro found modest support from stronger-than-expected eurozone Retail Sales, which rose 1.9% y/y (forecast 1.7%), alongside a 0.1% upward revision to the previous 2.9% result.
GBPUSD
GBPUSD drifted higher within a 1.2693-1.2740 range, recovering from yesterday’s losses following dovish comments from BoE Governor Andrew Bailey. The currency pair remains influenced by broader USD moves, with gains capped ahead of tomorrow’s US nonfarm payrolls report. November Services PMI came in at 50.8 (forecast 50), and Composite PMI was 50.5 (estimate 49.5). Bailey’s warning of gradual rate cuts in the coming year limited upside momentum.
USDJPY
USDJPY traded between 149.65 and 150.78, supported by Powell’s non-committal remarks on rate cuts and speculation over the BoJ’s December 18 decision. BoJ Board member Toyoaki Nakamura’s cautious stance on rate hikes added uncertainty, though he did not dismiss the possibility outright.
AUDUSD and NZDUSD
AUDUSD traded quietly in a 0.6421-0.6453 range, buoyed slightly by better-than-expected trade data but overshadowed by weaker September GDP results. Similarly, NZDUSD edged higher within a 0.5848-0.5882 range due to broad US dollar weakness.
USDMXN
USDMXN moved sideways in a 20.2454-20.3185 range after sliding yesterday when the US ISM Services PMI fell to 52.1 from October’s 56 reading. While the weaker ISM data suggests room for further Fed rate cuts, Powell’s comments tempered such expectations. Markets continue to anticipate a 25 bps rate cut on December 18.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC Fix: 7.1879 vs exp. 7.2664 (prev. 7.1934))
Shanghai Shenzhen CSI 300 fell 0.23% to 3921.59
Caixin Services PMI 51.5 (forecast 52.5, Oct. 52)
The Chinese Navy is attempting to annex Philippine territorial waters by force as Beijing attempts to enforce its illegal claim that the South China Sea is Chinese territory, Yesterday, the Philippines filed a diplomatic protest after Chinese warships fired water cannons at Philippine coast guard vessels.
Chart: USDCNY and USDCNH
Source: Investing.com
