December 23, 2024
- Canada October GDP beats but November projection is negative.
- Trump to Panama-“Deal or Steal”
- USD opens mixed as it consolidates this weeks gains.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.4399, overnight range,1.4349-1.4425, close 1.4378
Merry Christmas and Happy New Years to All. This is the final update for 2024.
USDCAD is winding down a tumultuous month close to its 2024 peak. There wasn’t much in the way of good news for the Canadian dollar in December.
It started with the Bank of Canada cutting interest rates by 50 bps for the second time in a row. The rate cut was followed by somewhat dovish guidance by Governor Tiff Macklem who suggested more rate cuts were in the pipeline. Donald Trump’s threat to slap on additional 25% tariffs to all Canadian imports due to a perceived lack of border security sparked a flurry of USDCAD demand, That threat also forced the abrupt resignation of Finance Minister Chrystia Freeland. She couldn’t justify raising the budget deficit by 50% for dubious political gimmicks when she said the government needed to keep its fiscal power dry to deal with the prospect of a trade war.
All of the above was exacerbated by the more cautious than expected FOMC interest rate outlook alongside the possibility of a new global trade war which blasted USDCAD higher.
WTI oil prices are steady in a 69.15-69.95 range. Opec’s extension of production cuts until the end of March 2025 are helping to offset concerns of oversupply due to weak Chinese demand.
Canada GDP rose 0.3% in October (forecast 0.1% m/m) thanks to higher services-producing industries due to increases in the real estate and rental sectors. The good news was erased by the advance GDP forecast for a 0.1% decline in November. The result boosted USDCAD to its session high.
The BoC Summary of Deliberations from December 11 are due today.
USDCAD Technical-s
The intraday USDCAD technicals are bullish while prices are trading above 1.4380 and looking for another test of resistance at 1.4450. A break below 1.4380 targets 1.4330.
The longer term technicals are unchanged. The uptrend from the beginning of October is intact while prices are above 1.4150 and looking for further gains to 1.4500. A downside break targets 1.4090.
For today, USDCAD support is 1.4370 and 1.4330. Resistance is 1.4440 and 1.4470
Today’s Range: 1.4330-1.4430
Chart: USDCAD daily
Source: Oanda.com
“Not-Yet-President” Trump Threatens Panama Canal
When Van Halen sang Panama, It was about a car. Trump’s version is about the canal.
The photo above, from Trump’s Truth Social account. Trump fancies himself to be a preeminent dealmaker and a master at using leverage as a means to an end. By becoming the 47th President of the United States, he gets leverage, especially if he can use the might of the US armed forces to “negotiate.” And because of that leverage Trump has Panama in the crosshairs. He decided that Panama is charging the US excessive rates to use the canal built by Americans. The fact that Chinese entities manage ports on each end of the canal can be used to justify “national security.”
Rocking around the Christmas Tree
This week is more about Santa Claus than Fed monetary policy. With Christmas and Boxing Day falling on Wednesday and Thursday, many traders have already booked the week off.
The few data releases available are likely to be ignored, both due to the absence of participants and the impending market maelstrom stirred up by Donald Trump.
Equity’s up, Greenback down.
The US dollar opened flat to mixed in an uneventful overnight session. Asia equity indexes climbed partly because Friday’s US PCE Price Index was a tick lower than expected. Japan’s Topix rose 0.92%, while Australia’s ASX 200 jumped 1.67%. European markets were not as upbeat and are trading around flat, as is the S&P 500 futures index. The US 10-year Treasury yield inched up to 4.534% from 4.524% at Friday’s close.
EURUSD
EURUSD traded sideways in Asia, then dropped from 1.0446 to 1.0389 in Europe following dovish remarks by ECB President Christine Lagarde. She said that the 2.0% inflation target was in reach, but she was a tad concerned by elevated inflation. EURUSD gains are limited due to the ongoing threat of Trump tariffs, which suggests more ECB rate cuts are in the cards. The EURUSD downtrend from September is intact while prices are below 1.0540.
GBPUSD
GBPUSD dropped to 1.2530 from 1.2588 following weaker-than-expected data. Retail Sales rose 0.2% in November (forecast 0.5%) and soft UK GDP data. The UK economy showed zero growth in Q3, and Q2 GDP was downgraded to 0.4%. GBPUSD technicals are bearish below 1.2680, with a break below 1.2490 targeting 1.2300.
USDJPY
USDJPY is trading at the top of its 156.34-156.93 range. The gains are fueled by a somewhat dovish BoJ monetary policy stance compared to a slightly hawkish Fed rate outlook. The rise in the US 10-year Treasury yield, on the heels of an unchanged BoJ rate decision, has USDJPY in an uptrend above 154.00.
AUDUSD and NZDUSD
AUDUSD traded in a 0.6241-0.6266 range but has a bearish bias due to the threat of US tariffs and China’s sluggish economic growth.
NZDUSD traded in a 0.5647-0.5662 range with a negative outlook. Weak New Zealand GDP, tariff uncertainties, and the soft Chinese economy are weighing on prices.
USDMXN
USDMXN traded sideways, albeit with a slight bid, rising from 20.0549 to 20.1664. Prices remained underpinned after Mexican inflation rose 0.5% in the first half of December (forecast 0.43%). USDMXN downside is limited due to Trump’s threat to levy 25% tariffs on Mexican imports, citing what Trump claims are Mexico’s lax drug and immigration policies.
BTCUSD (Bitcoin)
BTCUSD continues to trade poorly since prices peaked on December 17 at 108,268. BTCUSD traded in a 93,887-97,322 band overnight. The losses stem from year-end profit-taking in thin markets as the incoming Trump administration is expected to create a crypto-friendly environment.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC Fix: 7.1870 vs exp. 7.2880 (prev. 7.1901)
Shanghai Shenzhen CSI 300 rose 0.15% to 3933.57
Chart: USDCNY and USDCNH -Daily 4 hour.
Source: Investing.com
