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November 22, 2023
- FOMC minutes disappointed those looking for rate cut discussion.
- US Durable goods weak, but jobless claims better than expected.
- US dollar trading with a mixed to bullish bias.
FX at a Glance
USDCAD Snapshot: open 1.3699-1.3703, overnight range 1.3691-1.3742, close 1.3702
USDCAD action was rather dull overnight, but the currency pair blew its top after a robust US weekly claims report.
Weekly jobless claims fell by 24,000 to 209,000 from the upwardly revised 231,000 last week. That news popped USDCAD to 1.3742 from a pre-data level of 1.3712. October Durable goods orders were weaker than expected, falling 5.4% rather than -3.1% and much lower than September’s 4.6% result.
However, the news did not dissuade equity traders and S&P 500 futures are up 0.23% (as of 5:50 am PT)
Yesterday’s Canadian inflation report was close enough to the forecast that it barely registered with traders. USDCAD dipsy-doodled when the numbers were released but remained inside this weeks trading range. For the record, headline CPI fell to 3.1% y/y from 3.8% in September, but the decline was almost entirely due to falling gasoline prices. The only things that went up were food and shelter which only effects those that eat and sleep in a building.
Bank of Canada Governor Tiff Macklem will have more to say when he speaks about “The cost of high inflation” at 8:30 am PT.
The inflation news was followed by the Federal government’s Fall Fiscal update. In a nutshell, it outlined more spending, in an environment of higher interest rates, rising unemployment, and slowing economic growth, but hey, banning plastic straws makes all Canadians feel so much better because they are doing their bit to slow climate change.
The FOMC minutes, released yesterday, had a similar impact on financial markets as Canada’s CPI did on USDCAD. That is to say, not much. The minutes did not contain anything. They reaffirmed that interest rate risks were two-sided and the latest nonfarm payroll data, US CPI, and Retail Sales reports suggest the risk is more to the downside.
The USDCAD are bearish below 1.3740 which guards the November 1 downtrend line which sits at 1.3805. A break below 1.3680 targets the 1.3640-1.3660 support zone. A downside break gets interesting and argues for steeper losses to 1.3570, then 1.3530.
A break above 1.3740 suggests more 1.3670-1.3800 consolidation.
For today, USDCAD support at 1.3670 and 1.3630. Resistance is at 1.3740 and 1.3780. Today’s range 1.3680-1.3770.
Chart: USDCAD 4 hour
G-10 FX recap
Happy Thanksgiving Eve, America! It is the busiest day of the year for travel as Americans take to the skies and roads in the annual “Home for the Holidays” migration, even as severe weather impacts travel in many regions. Turkeys and travelers—both risk getting stuffed.
The FOMC minutes reaffirmed policymakers’ assertions that future rate decisions would be data-dependent but disappointed those looking to read about rate cut discussions. Monetary easing was not discussed.
Israel and Hamas have agreed to a four-day ceasefire, which Hamas is sure to break within 20 minutes. Why would anyone believe anything that the baby-beheading organization, Hamas, promises?
Risk sentiment remains positive, helped by a slightly lower US 10-year Treasury yield, which is at 4.393% after closing at 4.418% yesterday.
EURUSD was uneventful in a 1.0882-1.0923 range. ECB policymaker Isabel Schnabel predicted Eurozone inflation will hit 2.0% by 2025, while her colleague, Mario Centano, said that inflation is falling faster than it climbed, adding that there is a high probability that ECB rates have peaked.
GBPUSD traded quietly and is in the middle of its 1.2507-1.2550 range. Chancellor Jeremy Hunt’s Autumn Statement announced a 0.2% tax cut to employee national insurance contributions, predicted 0.7% economic growth in 2024, and a 2.4% inflation rate by the end of 2024. The news did not break the currency pair out of its overnight range.
USDJPY traded in a 148.02-149.36 range, rising in Asia then higher in Asia then inching down to 148.81 in NY trading. The rally followed news that Japan downgraded its growth outlook and their view on capital spending. A Cabinet Office spokesman said, “While business conditions and firms’ earnings continue to improve, the strength of the corporate sector is not necessarily translating into wages and investment. Domestic demand such as corporate investment and consumer spending lack strength.”
AUDUSD is trading near the top of its overnight 0.6527-0.6579 range. Comments by RBA Governor Michele Bullock warning of a slow and protracted inflation battle were largely ignored.
Michigan consumer Sentiment is expected to tick up to 60.5 from 60.4.
FX high, low, open (as of 6:28 am ET)
PBoC fix: today 7.1254, expected 7.1468, previous 7.1406
Shanghai Shenzhen CSI 300 fell 1.02% to 3544.42.
Chinese authorities are taking more steps to support beleaguered developers. Country Garden Holdings and Sino-Ocean Group are reportedly being added to a list of developers that will eligible for some sort of state support.
There is a report that China may be considering a 4.5-5.5% GDP growth target for 2024.
Chart: USDCNY (onshore) vs USDCNH (offshore)