September 16, 2024
- BoC Governor suggests a 50 bp cut is on the table
- Trump dodges a bullet-again.
- US dollar sinking on 50bp rat cut chatter.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3580, overnight range 1.3566-1.3598, previous close 1.3587
USDCAD traded sideways overnight and was the only currency pair to gain (albeit modestly) even as a wave of bearish US dollar sentiment washed over G-10 currencies. You can thank the Bank of Canada Governor for that.
Mr. Macklem chatted with the UK Financial Times (FT) yesterday and appeared to signal that policymakers may be considering slashing rates by 50 bps. Other Canadian economists have speculated about such a move, but this is the first time the BoC broached the subject publicly. Mr. Macklem said he was concerned about the weakening labor market and the impact of falling oil prices. He said, “the labor market is pointing to some downside risks,” adding that if growth doesn’t unfold as expected, “it could be appropriate to move faster on interest rates.”
WTI oil traded in a 67.70-68.60 range overnight. Prices are supported by supply disruptions from Hurricane Francine, but those disruptions are beginning to ease. Traders are betting on lower prices, with oil market commentator Eric Nuttal noting that the paper market for Brent contracts is net short, for the first time in history, even as global oil inventories are near all-time lows.
Canadian Manufacturing Sales rose 1.4%m/m in July, (forecast 1.1% previous -2.1%)
USDCAD technicals
The intraday USDCAD bid inside an two week uptrend channel with 1.3550 as the base and 1.3660 at the top. A break above 1.3660 targets1.3750 while a move below 1.3550 puts 1.3450 in play.
Longer term, the 1.3450-1.3750 range which has largely contained price action since April is still intact.
For today, USDCAD support is at 1.3550 and 1.3510. Resistance is at 1.3610 and 1.3650.
Today’s Range 1.3550-1.3630
Chart: USDCAD 4 hour
Source: Investing.com
It was in Florida-What Did You Expect?
There is nothing like an unsuccessful assassination attempt to bolster the popularity of a presidential candidate. For Donald Trump, it’s déjà vu. His flagging presidential campaign got a bit of a bump after the Secret Service thwarted another assassination attempt. The first reports said that agents noticed a man with a gun near Mar-a-Lago, where Trump was playing golf. No one should be surprised about a man with a gun in Florida, an occurrence as common as rental accommodation near Disney World.
Go Big or Go Home
Fed chair Jerome Powell announced that it was time to cut rates in his speech at Jackson Hole. Bond traders took him at his word, and this morning, the US 10-year Treasury yield sits at 3.65%, 160 bps below the current Fed benchmark rate of 5.25%. Futures traders see a neutral rate of 2.75% and a weakening labor market and now expect the Fed to cut 50 bps at Wednesday’s meeting. The US dollar index (DXY) is at 110.45, the low it reached in the wake of the Jackson Hole speech, while gold (XAUUSD) is trading at 2580.00.
Source: CMEGroup.com
EURUSD
EURUSD caught a bid and rallied from 1.1075 to 1.1130 on expectations that the size and speed of Fed rate cuts will outpace those of the ECB. Policymaker Luis de Guindos reiterated that services inflation was sticky but inflation would fall to 2% by year-end. His colleague, Peter Kazmir, said that the ECB would not be in a position to lower rates until its final meeting this year.
GBPUSD
GBPUSD is taking a walk on the rally side, rising from 1.3121 to 1.3202, helped by higher Rightmove House Price data for September (actual 1.2% y/y, previous 0.8%). Prices are supported by broad US dollar weakness and expectations that the Bank of England will leave rates unchanged at Thursday’s meeting.
USDJPY
USDJPY traded in a 139.58-140.95 range due to increased odds of a 50 bp Fed rate cut on Wednesday while the BoJ leaves its rates unchanged at Friday’s meeting. Trading was lighter than usual as Japanese markets were closed for Respect for the Aged Day.
AUDUSD and NZDUSD
AUDUSD is trading higher, rising in a 0.6703-0.6745 band. Renewed speculation of a 50 bp Fed rate cut, combined with earlier RBA minutes suggesting a rate hike was not out of the question, is bolstering prices. However, weak Chinese data is acting as a drag on gains. NZDUSD rose from 0.6155-0.6194 on improved risk sentiment, but upside may be limited due to concerns of aggressive RBNZ rate cuts, especially if Wednesday’s GDP data is weaker than expected.
USDMXN
USDMXN traded defensively in a 19.1592-19.2632 range with Mexican markets closed today. The selling pressure was due to increased odds for a 50 bp Fed rate cut this week while Mexican rates remain steady. For now, traders have stopped fretting about Mexico’s planned judicial reforms.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: closed
Shanghai Shenzhen closed
Chinese Markets closed
August Industrial Production rose 4.5% (forecast 4.8%, July 5.1%). Retail Sales rose 2.1% (forecast 2.5%, previous 2.7%). Foreign Direct Investment (FDI) fell 31.5%, previous -29.6%.
In addition to weak economic data, the US announced that proposed 100% tariffs on Chinese electric vehicles, and 50% on solar panels would go into effect Septemberf 27.
Chart: USDCNY and USDCNH
Source: Investing.com
