- Loonie sinking on broad US dollar demand
- Full slate of Central Bank meetings this week
- US dollar in demand in early NY trading
FX at a Glance
Source: IFXA Ltd/RP
USDCAD Snapshot Open 1.2752-56, Overnight Range 1.2708-1.2767, Previous close 1.2726
USDCAD rallied following Friday’s US inflation report (CPI actual 6.8% y/y vs previous 6.2% y/y) which served to underscore expectations for a hawkish FOMC outcome on December 15. Those gains continued overnight and USDCAD is trading at its session peak in early NY.
The BoC and Finance Minister are having a joint press conference this morning to announce a five-year renewal of the BoC’s inflation mandate. There may not be any surprises as the key details were leaked last week. The new mandate is the same as the old, except the BoC must acknowledge employment levels when setting policy.
USDCAD is bid ahead of Wednesday’s FOMC meeting which includes a set of new forecasts. Analysts expect the Fed to announce an early end to the taper program which also means earlier than expected US rate hikes.
USDCAD gains may be hard to achieve above the 1.2970-1.3000 area to various resistance levels and because the BoC may raise interest rates ahead of the Fed. Last week BoC Deputy Governor Toni Gravelle suggested that economic slack was being absorbed faster than expected while inflation was more persistent.
Technical view: The intraday USDCAD technicals are bullish above 1.2705, a minor uptrend line, guarding the November 25 uptrend line at 1.2630. A decisive break above 1.2770 will target 1.2850, with major resistance lurking in the 1.2970-1.3000 area. A move below 1.2630, suggests a test of 1.2510.
For today, USDCAD support is at 1.2710 and 1.2670. Resistance is at 1.2770 and 1.2810. Today’s Range 1.2710-1.2810
Chart USDCAD daily
Source: Saxo Bank
G-10 FX recap and outlook
There are nineteen central bank monetary policy meetings this week. However, only the FOMC, ECB, and BoE decisions are important to G-10 markets.
Friday, the S&P 500 closed at a record and that set the tone for Asia. The Nikkei 225 closed 0.71%, higher and Australia’s ASX 200 rose 0.35%. European traders partied cautiously. The German Dax has risen 0.88%, the French CAC is flat and the UK FTSE is down 0.12% due to UK Omicron issues. Wall Street futures suggest a positive open. Gold prices are close to unchanged while WTI oil ticked lower from Friday’s closing level. The US 10-year Treasury yield is 1.469%.
The Turkish lira is front page news again after another steep plunge forced the Central Bank of the Republic of Turkey (CBRT) to intervene in FX markets. USDTRY soared from 13.8825 to 14.6094, then dropped to 14.10 in choppy trading during the NY session. President Erdogan’s interference in CBRT monetary policy is behind the plunge in TRY.
Geopolitical uncertainty is also adding support to the US dollar. European and G-& foreign minister met over the weekend and prepared plans in the event Russia invaded Ukraine. Russia is upset about NATO’s missile buildup which they say threatens their security.
EURUSD traded with a negative bias in a 1.1261-1.1318 range. The upcoming ECB meeting may be more entertaining than usual as policymakers are toying with the idea of increasing, rather than reducing, PEPP purchases. The EU and UK have retreated from earlier inflammatory rhetoric about fishing rights and the Northern Ireland border. ECB’s Luis de Guindos tested positive for COVID-19. He may be concerned but FX markets ignored the news. EURUSD technicals are bearish below 1.1330.
GBPUSD bounced from 1.3223 to 1.3260. Analysts are debating whether the BoE will signal a rate hike in January or err on the side of caution due to new government restrictions due to the Omicron variant outbreak in the UK. GBPUSD technicals are bearish below 1.3300.
USDJPY rallied from 113.28 to 113.72. The Tankan report showed that Manufacturing sentiment was unchanged while non-manufacturing sentiment increased. Supply chain disruptions and Omicron impacted the results.
AUDUSD and NZDUSD tracked US dollar sentiment and both currency pairs are at their overnight low.
The economic calendars in Canada and the US are empty..
Chart of the Day: Turkish Lira (USDTRY)
Source: Bureau of Labor Statistics
FX open, high, low, previous close as of 6:00 am ET
Chart: Saxo Bank
Today’s Bank of China Fix 6.3669, Previous 6.3702
Shanghai Shenzhen CSI 300 rose 0.57% to 5,083.80
Chart: USDCNY 1 month
Source: Yahoo Finance