Source: Pixabay

September 8, 2021

BoC monetary policy meeting statement ahead

Risk aversion rises on COVID-19 fueled global economic slowdown

CAD dollar weakest G-10 currency since yesterday’s NY open

FX at a Glance:

Source: IFXA/RP

USDCAD Snapshot   Open 1.2578-82, Overnight Range 1.2628-1.2705, Previous close 1.2647

USDCAD spiked higher yesterday and never looked back overnight. The currency pair sank under a wave of negative risk sentiment sparked in part, by a surge in US 10-year Treasury yields to 1.385%.  Those yields eased overnight, dipping to 1.351% and USDCAD inched down to 1.2670 from 1.2705.  A slide in WTI oil prices from $69.35 to $$67.70 yesterday, may have encouraged USDCAD demand, but the subsequent WTI rally to $69.22 has not attracted sellers today.

The Bank of Canada monetary policy meeting will be a non-event.  It is the middle of the federal election and BoC officials are loathe to say anything which could be deemed as favouring one party over another. BoC Governor Tiff Macklem speaks about “Economic progress report: QE and the reinvestment phase, Thursday.  He is unlikely to say anything newsworthy as it is the middle of the election.

Canada Ivey PMI is due today.

Technical view:  The intraday USDCAD technicals are bullish following the break above resistance qat 1.2590 and 1.2650.  Further gains above 1.2705 will lead to 1.2850. However, the steepness of the rally without an underlying catalysts warns that prices could easily retrace to 1.2612, while maintaining their bullish bias.

For today, support is at 1.2650 and 1.2610.  Resistance is 1.2705 and 1.2740. Today’s range 1.2610-1.2710

Chart USDCAD daily

 Source: Saxo Bank

G-10 FX recap and outlook

The US dollar added to yesterday’s gains in a somewhat risk-averse session. The surge in 10-year Treasury yields, comments by St Louis Fed President James Bullard, ongoing global growth slowdown worries due to rising Delta and Mu-variant COVID-19 cases, and China’s anti-social behaviour, combined to fuel US dollar demand.

Mr Bullard repeated his well-known view that the Fed needs to start tapering.  He isn’t worried about the drop in NFP noting “There is plenty of demand for workers and there are more job openings than there are unemployed workers.”

Traders may have been spooked by yesterday’s news that the UK hiked taxes to begin paying for the programs and measures introduced to fight the pandemic. Who’s next? Canada, USA?

Asia equity traders were of two minds and the major indexes closed on a mixed note.  That wasn’t the case in Europe where the German Dax leads indexes lower.  S&P 500 and DJIA futures recouped most of their overnight losses and Wall Street is poised to only modestly lower.   Oil and gold prices are posting gains and 10-year Treasury yields are 1.352%.

EURUSD traded sideways in Asia and dropped in Europe, falling from 1.1850 to 1.1813, mainly due to broad US dollar strength.  Position adjusting ahead of tomorrow’s ECB meeting may have played a role. For today, a drop below 1.1800 targets 1.1750.

GBPUSD traded with a negative bias in a 1.3752-89 range, in part due to the latest tax hike.  GBPUSD snapped a two-week uptrend when prices dropped below 1.3800 today, which sets the stage for further losses to 1.3660.

USDJPY consolidated yesterday’s gains in a 110.15-110.44 range with prices supported by higher US Treasury yields and hopes for another Japanese fiscal stimulus package from new leadership.

AUDUSD and NZDUSD dropped on the back of broad US dollar demand.  AUDUSD suffered more due to the RBA’s dovish outlook.

There are no top-tier US economic releases today.

Chart of the Day- Bitcoin (BTCUSD)


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 0.41%% to 4972.13

Chinese officials say they will increase transparency of policies and will continue to crackdown to improve competition.

Chart: USDCNY 1 month

Source: Yahoo Finance