November 8, 2024
- Canada employment gains are lower than expected.
- FOMC delivers 25 bp rate cut and doesn’t rock the boat.
- US dollar retreats on profit-taking ahead of the weekend
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3891 overnight range 1.3858-1.3920 close 1.3863
USDCAD opened little changed despite trading in a fairly wide 1.3842-1.3949 band on Thursday. The belief that the Bank of Canada needs to cut rates faster and deeper than the Fed limited USDCAD losses despite the FOMC cutting rates by 25 bps to 4.75%. The Fed is expected to take a slow and steady approach to monetary policy while the sluggish Canadian economy suggests that BoC officials need to be more active.
Today’s Canadian Labour Force Survey showed Canada gained 14, 500 new jobs in October while the unemployment rate remained unchanged at 6.5%. USDCAD climbed modestly on the news as the soft data suggests the Bank of Canada does not have much choice in lowering rates. However, another 50 bp rate cut now seems unlikely due to the uncertainty surrounding Trump’s tariff plans which included a 10% levy on all imports, including Canada. USMC Agreement on Trade be damned.
The Michigan Consumer Sentiment Index is expected at 71 compared to 70.5 previously
USDCAD Technicals
The intraday USDCAD technicals are unchanged. They are bullish above 1.3860 and looking for a break above 1.3960. A move below 1.3860 risks a retest of 1.3820.
The four hour chart shows USDCAD entrenched in a 1.3820-1.3960 range but with a bullish bias thanks to the uptrend from October 11.
For today, USDCAD support is 1.3860 and 1.3820. Resistance is 1.3920 and 1.3960.
Today’s Range 1.3860-1.3960
Chart: USDCAD 4 hour
Someone Charge My Phone
President-elect Donald Trump burned through phone batteries as he fielded calls from numerous world leaders, all paying homage to the great man and hoping to curry favour. Justin Trudeau was quick off the mark, telling Mr. Trump, “The friendship between Canada and the U.S. is the envy of the world.” There is no truth to the rumour that Trump, who once referred to Justin as a “far-left lunatic,” fired the aide who put the call through. Other callers included the leaders of China, France, Israel, the UK, and even Ukrainian President Volodymyr. Everyone told Trump that all the nasty comments attributed to them were fake news promoted by the left-wing media.
Not Going Anywhere
The media has been pushing a narrative saying Trump threatened to fire Fed Chair Jerome Powell, which is basically a lie. He never said that. Sure, he criticized the Fed and Powell’s monetary policy, but he knew he couldn’t fire the guy. In a February 2024 interview, he said he wouldn’t reappoint Powell, and in July he told Bloomberg he would allow Powell to serve out his term. But many reporters rarely let the facts get in the way of a story. During yesterday’s post-FOMC meeting press conference, a reporter asked Powell if he would step aside if requested to by Trump. The answer was “No,” followed with “not permitted under the law.”
FOMC Doesn’t Rock the Boat
The Fed delivered and cut rates by 25 bp to 4.75%. The move was expected, but the statement implied that policymakers were a tad less dovish because they cut the line from the October statement about “confidence in inflation moving sustainably towards the 2% target.” Mr. Powell said the Committee was not yet concerned about higher bond yields and is still in the process of recalibrating from fairly restrictive rates.
Battered and Bloodied, China Answers the Bell
Xi Jinping is doing his best Rocky impression. The economy he presides over has been battered, bruised, and bloodied, but it is still on its feet. The Ministry of Finance announced a $1.3 trillion plan to alleviate local government debt issues. The result is that local governments will now have cash to implement stimulus measures. Chinese equity traders were unimpressed.
Equity Rally Rests
Asian equity indexes closed mixed. Australia’s ASX 200 rose 0.80%, Hong Kong’s Hang Seng fell 1.07%, and Japan’s Topix was flat. European bourses are in the red, with the French CAC 40 down 0.86% and the German Dax down 0.67%. S&P 500 futures are flat in early NY. The US 10-year Treasury yield is sitting at 4.33%.
EURUSD
EURUSD weakened following the Fed announcement and then consolidated the losses in a 1.0747-1.0806 range. EURUSD gains overnight were likely just profit-taking as traders digest the Trump win and the Fed rate cut, but they are capped because of German political turmoil. Trading may be messy in a 1.0750-1.0700 range until after the 10:00 am option expiry window as $4.9 billion of strikes expire.
GBPUSD
GBPUSD is traded in a 1.2936-1.2990 range and is now at the its session low. The Bank of England cut rates by 25 bps to 4.75%, which was predicted, but hinted at a slower pace of cuts going forward. Officials were concerned that budget measures could push up prices at a faster rate, which is enough for analysts to erase chances of another rate cut in December.
USDJPY
USDJPY continued its post-FOMC slide and dropped from 153.37 to 152.14, partly due to profit-taking following the post-Trump election gains and the weekend. Prices have since rebounded to 152.77. USDJPY support is at 151.67, the 200-day moving average.
AUDUSD and NZDUSD
AUDUSD traded defensively, falling from 0.6682 to 0.6606 due to a mix of pre-weekend profit-taking and disappointment around the latest Chinese stimulus news. Trump’s tariff threats are also weighing on the currency. NZDUSD is in the same boat as the Aussie and traded in a 0.6623-0.6682 range.
USDMXN
USDMXN consolidated yesterday’s losses and traded in a 19.7740-19.8676 range but climbed back to 20.0095 after 10-year Treasury yields rose to 4.33%. Trump’s threat of a 25% tariff on Mexican imports underpins USDMXN.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: 7.1433 vs prev. 7.1659
Shanghai Shenzhen CSI 300 fell 1.0% to 4104.05
Chart: USDCNY and USDCNH
Source: Investing.com
