Photo: Bing AI

October 17, 2023

  • Canadian inflation slows.
  • US Retail Sales soar, August revised higher.
  • USD opens mixed but rallies post Retail Sales

FX at a Glance

Source: IFXA/RP

USDCAD Snapshot:  open: 1.3630-34, range 1.3606-1.3700, close 1.3611

Canadian inflation gains cooled in September. Headline CPI rose 3.8% y/y, down from 4.0% in August.

On Friday, Mr. Macklem said that inflation is too high, but there are clear signs that aggressive rate hikes are reducing demand. Groceries got cheaper but remained above headline inflation, rising 5.8% year over year, following a 6.9% increase in August. So now, you can afford cheese with your macaroni.

Today’s data serves up a dilemma for the Bank of Canada. Inflation may have fallen, but the Business Outlook Survey (BOS) and the Canadian Survey of Consumer Expectations (CSCE) show consumers fear higher inflation. In addition, the Business Outlook Survey (BOS) sentiment index deteriorated again in Q3, to -3.51 compared to -2.15 in Q2.

Today’s results lower the odds that the BoC will hike rates next week.

USDCAD popped following the CPI data, but the gains were due to the stronger than expected US Retail Sales report, which lifted USDCAD from 1.3630 to 1.3700.

Source Bank of Canada

USDCAD Technicals

The intraday USDCAD technicals are bullish above 1.3620 with todays break above 1.3670 targeting 1.3710 , which if broken will lead to a test of 1.3800.

The USDCAD uptrend that started from the July 14 low comes into play at 1.3480 while  resistance in the 1.3780-1.3800 caps the top.

For today, USDCAD support is at 1.3630 and 1.3610.  Resistance is at 1.3710 and 1.3750. Todays Range 1.3630-1.3730

Chart: USDCAD daily


G-10 FX recap

World leaders are on the move. President Joe Biden is packing his bags for a trip to Israel, accompanied by his usual entourage along with the USS Gerald R. Ford carrier strike group. Russian President Vlad Putin is already in Beijing, paying homage to the newest Chinese Emperor. Justin Trudeau has taken time out from his busy vacation schedule to go to Ottawa.

US dollar bulls went on the rampage after Retail Sales soared in September, rising 0.7% m/m compared to the forecast of a 0.3% increase. The greenback got an added lift after the August numbers were revised higher, from 0.6% to 0.8%.

S&P 500 futures tumbled 0.40%, while the US 10-year yield spiked to 4.81% from 4.75% at the NY open.

EURUSD chopped in a 1.0532-1.0579 range, with the peak occurring before the US data. Prices have since dropped to 1.0555. Earlier, EURUSD was underpinned when the Eurozone ZEW Indicator of Economic Sentiment Survey rose 2.3, which was higher than expected.

GBPUSD is trading with a bearish bias in a 1.2134-1.2263 range. Traders were disappointed by lower than expected August Average Hourly earnings, including bonus data (Actual 8.1% 3 m/y/y), which lowered the odds for another BoE rate increase.

USDJPY traded in a 148.75-149.80 range, but traders are unwilling to test the will of the Bank of Japan by driving prices above 150.00.

AUDUSD traded in a 0.6334-0.6367 range, ignoring the post Retail Sales excitement, and remained inside its overnight band.

NZDUSD dipped to the bottom of its 0.5871-0.5930 range on the heels of the US data. Kiwi is trading defensively following a lower than expected CPI reading overnight, which suggests that the RBNZ has no need to raise rates further.

FX high, low, open

China Snapshot

Bank of China Fix: today 7.1796, expected 7.3038, previous 7.1798.

Shanghai Shenzhen CSI 300 rose 0.35% to 3639.40.

Chinese property developer Country Garden will be deemed to be in default if it fails to make a $15 million coupon payment today which is the last day of a 30-day grace period.

Vlad “the Mad Putin” is having a conjugal visit with his ”bestie” Xi “I wanna-be-Emperor” Jinping

­Chart: USDCNY

Source: Bloomberg