September 9, 2021

China PPI rises 9.5% m/m, fastest pace in 13 years, CPI dips to 0.8% m/m

ECB tweaks PEPP but does not quantify amount

US dollar opens slightly lower compared to Wednesday NY close.

FX at a Glance:

Source: IFXA/RP

USDCAD Snapshot   Open 1.2685-89, Overnight Range 1.2681-1.2726, Previous close 1.2695

USDCAD soared yesterday, reaching 1.2755 when the Bank of Canada (BoC) monetary policy statement was released, before settling into a 1.2681-1.2726 range overnight. The BoC delivered a non-event statement, as widely expected. 

Prices are underpinned by yesterday’s US JOLTS survey which shows a record number of job openings (10.9 million) which exceeds the number of unemployed workers, which the Bureau of Labor Statistics pegs at 8.3 million.  Arguably, the US economy has fulfilled the full-employment criteria of the Feds mandate.

USDCAD pushed back above 1.2700 following the better than expected weekly jobless claims data.

BoC Governor Macklem delivers an “Economic progress report: QE and the reinvestment phase” at noon.

Technical view:  The intraday USDCAD technicals are bullish after breaking resistance in the 1.2620 area, leaving an intraday uptrend line intact while prices are above 1.2660. However, the failure to sustain gains above 1.2730, and the steepness of this weeks rally warn that a break below 1.2660 will extend losses to 1.2590.

For today, support is at 1.2660 and 1.2610.  Resistance is 1.2705 and 1.2730. Today’s range 1.2610-1.2690

Chart USDCAD 4-Hour

 Source: Saxo Bank

G-10 FX recap and outlook

US weekly jobless claims fell 35,000 to 310,000 from the upwardly revised 345,000 reported last week.

EURUSD dropped from 1.1840 to 1.1809 upon the release of the ECB monetary policy statement.  The ECB left rates unchanged as widely expected.  They agreed to reduce the pace of PEPP purchases but did not disclose a specific amount.  Instead, purchases will be made “flexibly.”

President Christine Lagarde’s press conference is ongoing and EURUSD remains on the defensive

Overnight, risk sentiment was poor in Asia, with equity traders following Wall Street’s lead. Hong Kong’s Hang Seng index was hit hard, dropping 2.30% as the fall-out from heavy-handed government intervention continues to roil markets and from mixed Chinese inflation data.  European stocks are mixed, with all but the FTSE 100 recovering earlier losses.  S&P 500 and DJIA futures point to a negative open on Wall Street.  Gold and oil prices are a tad firmer. US 10-year Treasury yields are steady at 1.329%.

More hawkish rhetoric from Fed officials  and the Fed’s Beige Book on Wednesday added to market insecurities.   The Beige Book noted that “Economic growth downshifted slightly to a moderate pace in early July through August.  The downshift occurred due to a pullback in dining out and travel because of the rise in COVID variant cases and supply chain disruptions.

GBPUSD rallied from 1.3755 to 1.3846 after BoE Governor Andrew Bailey acknowledged that the Monetary Policy Committee (MPC) was split 50-50 as to whether the economy had met the minimum conditions for a rate hike.  Mr Bailey thinks the minimum conditions have been met, but the economy is not ready for higher rates.  GBPUSD needs to break above 1.3830 or risk a retracement to 1.3780.

USDJPY continues to bounce between 109.50-110.50, tracking both US Treasury yields and domestic politics where there is the possibility of another fiscal stimulus package.

AUDUSD and NZDUSD recouped yesterday’s losses but remained on the defensive due to US dollar demand from rising risk aversion.

Chart of the Day- US Dollar Index


FX open, high, low, previous close

Source: Saxo Bank

China Snapshot

Today’s Bank of China Fix, 6.4674     Previous 6.4533                        

Shanghai Shenzhen CSI 300 fell 0.4%% to 4970.71

August CPI 0.8% (forecast 1.0%, July 1.0%)

August PPI 9.5% (forecast 9.0%, July 9.0%).

Chart: USDCNY 1 month

Source: Yahoo Finance