December 18, 2024
- Markets on hold until 2pm FOMC decision
- UK inflation hits 8mth high.
- USD opens mixed, commodity currencies slide.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.4322, overnight range,1.4305-1.4332, close 1.4311
USDCAD made and new high overnight due to a combination of political drama and weak data. The Fall Economic Update, tabled on Monday suggested that the 2024 budget deficit would soar to $60.1 billion compared to $40 billion projected in March.
USDCAD remains supported by the Bank of Canada’s dovish monetary policy outlook which contrasts that of the Fed, which is expected to be rather neutral In addition, Trump’s threat to levy 25% tariffs on all Canadian imports is a major negative, especially in the face of a dysfunctional government.
WTI oil prices inched higher, rising from 69.62 to 70.30 after the American Petroleum Institute reported a steep 4.7 million barrel draw down in crude inventories. However gains are limited due to Opec suggesting weaker demand in the near term.
The US Building Permits rose 6.1% in November (previous-0.4%) while Housing starts fell 1.8%.
There were no Canadian economic reports.
USDCAD Technicals
The intraday USDCAD technicals show an uptrend channel from December 6 that is intact while prices are between 1.4240 and 1.4370. A neutral FOMC outcome, combined with domestic Canadian drama suggests the topside is vulnerable.
The following monthly chart highlights the lack of resistance between 1.3875 and 1.4800 with the uptrend line from June 2021 intact while prices are above 1.3510.
For today, USDCAD support is 1.4280 and 1.4240. Resistance is 1.4350 and 1.4380
Today’s Range: 1.4290-1.4390.
Chart: USDCAD monthly
Source: Investing.com
FOMC in Trump’s Shadow
Fed Chair Jerome Powell is dancing a jig as Trump plays the fiddle. Trump’s pending return to the white House has overshadowed the usual drama and angst ahead of a FOMC policy meeting . A 25 bp rate cut is fully priced in and the Summary of Projections dot-plot will be useless. None of the policymakers know what tariffs, or tax changes Trump will announce on Day 1, and Trump’s actions will dictate the FOMC forecasts.
EURUSD
EURUSD is adrift in a 1.0488-1.0513 range with yesterday’s ZEW and Ifo data having little to no impact. The single currency remains vulnerable to the “strong dollar” narrative which may be reinforced today if Powell’s remarks have a hawkish bias.
GBPUSD
GBPUSD is slightly bid in a 1.2679-1.2723 range after UK inflation rose to 2.6% from 2.3%y/y, which was offset by the monthly increase slowing to 0.1% m/m from 0.1%, as expected. Furthermore, recent strong wage growth and the aftermath of the Autumn Budget suggest that the Bank of England will not cut interest rates tomorrow.
USDJPY
USDJPY was directionless in a 153.34-153.79 range. Japan’s trade deficit narrowed thanks to a rise in exports. Traders expect the BoJ to leave rates unchanged at Friday’s meeting, although analysts at JPMorgan Chase expect a 25 bp hike.
AUDUSD and NZDUSD
AUDUSD made a new 2024 low when it dropped to 0.6305 from 0.6341 overnight. Sentiment is negative due to increased RBA rate cut expectations following soft GDP data and lower commodity prices.
NZDUSD also made a new 2024 low as it traded in a 0.5723-0.5760 band due to a dovish RBNZ rate outlook in the face of a cautious to steady FOMC monetary policy.
USDMXN
USDMXN traded in a 20.1316-20.2170 range. Banxico is expected to cut rates by 25 bps tomorrow with USDMXN downside limited by concerns ahead of Trump’s inauguration.
BTCUSD (Bitcoin)
BTCUSD suffered from some pre-FOMC profit-taking and dropped to 103,100 from 108,100, before rebounding to 104,720 in NY. Market sentiment is bullish ahead of an expected crypto-friendly Trump administration and talk that the US will establish a bitcoin reserve
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC Fix: 7.1880 vs exp. 7.2838 (prev. 7.1891)
Shanghai Shenzhen CSI 300 rose 0.51% to 3941.899
Chart: USDCNY and USDCNH
Source: Investing.com
