June 13, 2024
- PPI falls and Weekly jobless claims rise.
- FOMC dot-plot reduces rate cuts in 2024 to just one.
- US dollar pressured after US data today.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3742, overnight range 1.3714-1.3750, close 1.3725
USDCAD retreated from 1.3750 to 1.3718 after the US Producer Price Index fell 2.2% y/y in May, well below the 2.5% predicted and below the upwardly revised 2.3% in April. In addition, weekly US jobless claims rose 13,000 to 242,000. The Fed wants to see evidence of inflation trending lower and an easing of the Labour market. Today’s data ticks both boxes.
USDCAD failed to break below support in the 1.3680-90 area yesterday after the US inflation data but was thwarted by the FOMC’s dot-plot surprise .
Congratulations worker bees. The Fraser Institute announced today is “Tax Freedom Day.” Every dollar you earned since January 1 until yesterday has gone to “income taxes, payroll taxes, health taxes, sales taxes, property taxes, profit taxes, tobacco and alcohol taxes, amusement and other excise taxes, auto, fuel and motor vehicle licence fees and carbon taxes, import duties, natural resource levies and other charges, not all readily visible to the public.” Even worse, Tax Freedom day is four days later than it was in 2019.
WTI oil prices are steady in a 77.67-78.47 range. The prospect of unchanged US rates for longer slowing global growth is offset by recent Opec actions and forecasts for increased fuel demand this summer. The EIA report that US crude inventories rose by 3.73 million barrels capped gains.
Bank of Canada Deputy Governor Sharon Kozicki is speaking in Ottawa today and the text of her speech is available as of 9:35 am ET.
USDCAD Technicals
The USDCAD intraday technicals are neutral inside a 1.3660-1.3790 trading range. A break above 1.3760 would test the top end of the band while a move below 1.3720 targets the floor. The June uptrend line is intact while prices are above 1.3670.
The longer term outlook is unchanged with the uptrend line from the beginning of January 2024 is intact while prices are above 1.3610. Support from the 100-day and 200-day moving averages lies just below that level.
For today, USDCAD support is at 1.3710 and 1.3680. Resistance is at 1.3760 and 1.3810. Today’s range is 1.3690-1.3790
Chart: USDCAD 4 hour
Source: DailyFX
Data-Dependent Fed Ignores the Data.
Fed Chair Jerome Powell claims that the Fed is data-dependent, then essentially ignored the data. CPI was 0% m/m in May, which is a tad below the Fed’s 2.0% y/y target. Big deal. In his press conference opening statement, he said, “We have stated that we do not expect it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2 percent. We will need to see more good data to bolster our confidence that inflation is moving sustainably toward 2 percent.” So, not a guy in a hurry to cut interest rates.
Dot-Plot Just a Crock
The SEP Dot-plot projections signaled just one rate cut in 2024 compared to three in the previous forecast. Traders were not impressed, and the US dollar recouped some of its pre-FOMC losses, while the 10-year Treasury yield spiked from 4.25% to 4.33%, which was still lower than the 4.42% level pre-CPI. Fed Chair Powell said that the dot-plot projections were a crock of s**t. Well, not exactly, but he did go on at length as to why markets should ignore them altogether. He said, “These are, of course, individual projections. They’re not a committee forecast. They’re not a plan.” So, dots to be taken with a big grain of salt.
Havana Nice Day 😊
Russia President Vladimir Putin is flipping the USA the bird. Four Russian naval vessels, including a nuclear-powered sub, are parked in Havana Bay, a mere 145 miles (233 km) away from Florida. Putin is showing Americans that although they impose sanctions, moderately disrupt Russian oil shipments, and seize the yachts of law-abiding Russian oligarchs, Mother Russia has the means to strike into the heart of the USA.
EURUSD
EURUSD is at the top if its 1.0801-1.0817 range following today’s US PPI and jobless claims data which resulted in the US 10-year Treasury yield dropping to 4.267% from 4.314% at the open . Wholesale Price Index and Eurozone Industrial Production data were not factors and EURUSD is bullish above 1.0730.
GBPUSD
GBPUSD moves mirrored those of EURUSD, with cable rising and falling in a pre-CPI, post-FOMC range of 1.2763-1.2860 and it is trading just above the previous low in NY. GBPUSD gains are limited due to next week’s UK inflation report and renewed speculation that the BoE will cut interest rates in August. For now, traders are cautious ahead of the UK election on July 4.
USDJPY
USDJPY sank then soared between US inflation data and the downgraded Fed dot-plot forecast, falling from 157.43 pre-CPI to 155.73 afterwards, USDJPY moves are tracking Treasury yields and the currency pair dropped to 157.04 after the 10-year yield dropped to 4.267% this morning. The BoJ monetary policy meeting is tomorrow, and Nikkei News is reporting that the central bank may reduce government bond purchases which may undermine USDJPY.
AUDUSD and NZDUSD
AUDUSD rode the CPI/FOMC roller coaster and is trading in the middle of yesterday’s 0.6613-0.6704 range. AUDUSD support after the news that Australia added 39,700 jobs (forecast 30,000) and that the unemployment rate fell to 4.0% from 4.1% faded quickly. NZDUSD traded in a 0.6640-0.6668 range overnight. New Zealand Electronic Card Retail Sales fell 1.1% m/m in May, down from -0.4% in April, confirming that the NZ retail landscape is weak.
USDMXN
USDMXN traded with a bullish bias in a 18.7007-18.8417 range, fueled by the FOMC dot-plot forecast suggesting just one rate cut in 2024 . Prices dropped to 18.57487 following today’s US data but the down side is limited due to bullish USDMXN sentiment following the election.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: 7.1122 vs exp. 7.2384 (prev. 7.1133).
Shanghai Shenzhen CSI 300 fell 0.51% to 3526.13
EU plans to impose tariffs of up to 38% on imports of Chinese electric vehicles in an effort to level the playing field, as Chinese EV manufacturers are heavily subsidized. Chinese authorities responded by saying “It is hoped the EU will make some serious reconsideration and stop going further in the wrong direction.”
Chart: USDCNY and USDCNH
Source: Investing.com
