December 20, 2024
- Canada retail sales slump
- Core PCE price index data unchanged
- USD opens mixed as it consolidates this weeks gains.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.4384, overnight range,1.4371-1.4436, close 1.4399
USDCAD was largely ignored overnight but it still has a bid. Canada and US 10-year interest rate differentials narrowed from yesterday’s low of -126.4 to -118.3 this morning which helped knock prices from the overnight top to its current 1.4380 level.
Prime Minister Trudeau is expected to announce a major cabinet shuffle today which is akin to changing seats in a car filled with explosives being driven off a steep cliff into volcano crater. His government is toast, and he just won’t admit it. That political uncertainty does not encourage Canadian dollar demand.
WTI oil traded down from 68.28 to 68.46 due to ongoing concerns that demand will fall far short of supply. China said that its oil demand growth will peak in three years at about 16 million/barrels per day.
Canada Retail Sales came in below expectations. October Retail Sales rose 0.6% (forecast 0.7%, while retail Sales, ex autos rose just 0.1% compared to the consensus forecast for a 0.5% increase. USDCAD ticked higher on the news.
USDCAD Technical-s
The intraday USDCAD technicals are modestly bearish while prices are below 1.4440, looking for a break below 1.4360 to extend losses to 1.4305. A break above 1.400 targets 1.4450.
Longer term, the uptrend channel from the beginning of October is intact while prices are above 1.4130 and looking for further gains to 1.4500. A downside break targets 1.4090.
For today, USDCAD support is 1.4360 and 1.4300. Resistance is 1.4440 and 1.4460
Today’s Range: 1.4330-1.4430
Chart: USDCAD daily
Source: Oanda.com
Another US Government Shutdown Looms
Donald Trump isn’t even President yet but it was his influence that derailed a Republican/Democrat temporary funding bill. The politicians have until 12:01 am Sunday to do a deal or the federal government suffers a partial-shutdown. The news boosted risk aversion sentiment ahead of another key inflation report today.
No Drama from US Inflation Numbers.
US November PCE-price index, a Fed-favourite metric, was unchanged at 2.8% y/y in November but rose 0.1% m/m compared to the forecast for a 0.2% increase. The Michigan Consumer Confidence Index is due at 7:00 am PST and expected to be unchanged at 74.
EURUSD
EURUSD is consolidating its post-FOMC losses in a 1.0343-1.0398 range and although prices are at the top of that band the currency pair has a bearish bias. President-to-be Trump had something to do with that. He posted on Truth Social “I told the European Union that they must make up their tremendous deficit with the United States by the large scale purchase of our oil and gas. Otherwise, it is TARIFFS all the way!!!”
GBPUSD
GBPUSD is not having a good week. The Fed crushed it on Wednesday when they lowered their expectations for rate cuts in 2025, but the Bank of England gave it some support when they left rates unchanged at 4.75% due to economic uncertainty. Today’s weaker than expected retail sales data (actual 0.2% m/m compared to forecast of 0.5%) suggests the BoE’s concerns about the economy are warranted.
USDJPY
USDJPY traded erratically in a 156.62-157.93 range as traders deal with a “hawkish” Fed, an overly cautious BoJ, and verbal intervention by Japanese officials. Finance Minister Katsunobu Kato said, “We have been recently seeing one-sided and sharp moves. As we are alarmed by recent currency market developments including those driven by speculators, we’ll take appropriate action against excessive moves.”
AUDUSD and NZDUSD
AUDUSD consolidated yesterday’s losses in a 0.6215-0.6250 range and remained on the defensive due to the latest US budget drama.
NZDUSD traded in a 0.5613-0.5646 and received a bit of support after the New Zealand Trade deficit narrowed from -$1.65 billion to -$437 million.
USDMXN
USDMXN has had a choppy few days. USDMXN rallied from 20.0718 on Wednesday then jumped to 20.4268 after the FOMC decision. Prices continued to climb the next day and peaked at 20.5115 then dropped to 20.2931 after Banxico cut rates by 25bps to 10%. The move was expected. The statement suggested further rate cuts were in the cards, but policymakers would keep rates in restrictive territory. Prices traded sideways overnight and inside the two-day range.
BTCUSD (Bitcoin)
BTCUSD peaked early in Asia at 102,800 then dropped steadily to 94,333.00 as pre-holiday profit-taking and uncertainty around US government finances added to the stress on prices following the Fed’s “dovish” rate cut. However, the downside is limited due to the anticipated crypto-friendly Trump administration.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC Fix: 7.1901 vs exp. 7.3086 (prev. 7.1911)
Shanghai Shenzhen CSI 300 fell 0.45% to 3927.74
Chart: USDCNY and USDCNH -Daily 1 year.
PBoC maintained 1yr LPR at 3.10% and 5yr LPR at 3.60% as expected
China 1-year bond yields fell to 0.85%, down 17 bps to a level last seen in 2003. Traders are betting on deep rate cuts early in 2025 to combat new US tariffs.
Source: Investing.com
