November 25, 2024
- Japan stimulus package suggests December rate hike.
- Global risk sentiment rises after Trump picks Treasury Secretary.
- US dollar opens mixed from Friday, but weaker overnight.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3960, overnight range,1.3928-1.3977, close 1.3961
USDCAD erased all of its gains following the broad US dollar sell-off overnight on the news Trump nominated Scott Bessent for Treasury Secretary. Canadian retail sales matched Statistics Canada’s flash estimate, potentially signaling a less dovish Bank of Canada monetary policy outlook in December.”
The Federal government’s stimulus announcement (forgoing HST on many items for a couple of months beginning December 15) and $250 cheques for those earning less than $150,000 risks reigniting inflation. BoC policymakers are likely to temper rate cut enthusiasm which has seen CAD/US interest rate differentials narrow and return to levels where the were a month ago.
WTI oil prices in a 70.41-71.43 range and are sitting at 71.05 in early NY trading . Prices eased on the back of broad US dollar losses but remain supported by geopolitical tensions.
There are no US or Canadian economic reports of note today.
USDCAD Technicals
The intraday technicals are bullish while trading above 1.3950 and have completely erased the losses seen in Asia. A break above 1.3990-1.4010 suggests further gains to 1.4050 while failure to break the top points to a retest of support in the 1.3940-50 area.
Longer term, the uptrend that began October 9 is intact while prices are above the 1.3920-30 area while momentum indicators are neutral .
For today, USDCAD support is 1.3940 and 1.3910. Resistance is 1.3990 and 1.4050
Today’s Range 1.3940-1.4010.
Chart: USDCAD daily
Source: Oanda.com
Movin on Up
Scott Bessent’s resume may soon include US Treasury Secretary in addition to Key Square Capital Management and Soros Fund Management. Global markets applauded the nomination as Mr. Bessent is viewed as a “strong dollar advocate” and a man who favors a gradual approach to tariffs in order to downgrade inflation risks. The initial reaction saw global stock indexes rise, and the US dollar and Treasury yields fall. The greenback has recovered some of those losses in early NY.
Stock Markets are Smiling
Asian equity markets rallied, led by a 0.71% gain in Japan’s Topix, although that move had more to do with a government stimulus announcement than news of Bessent’s appointment. Australia’s ASX 200 rose 0.28%.
European bourses are in positive territory. The German DAX is leading the rally with a 0.43% gain. S&P 500 futures are up 0.55%, while the US 10-year Treasury yield slipped from 4.42% at Friday’s close to 4.312% today.
Thanksgiving May Overshadow Data
There are a ton of US economic reports released on Wednesday due to the Thanksgiving holiday the next day and, for many, Friday is a holiday as well. The US holidays may also put a damper on month-end portfolio rebalancing. More than likely, traders will be sidelined for most of the week as US liquidity begins to evaporate.
EURUSD
EURUSD gapped higher at the open in Asia. Prices closed at 1.0427 in NY on Friday and opened in Asia at 1.0480. The rally topped out at 1.0501, and then EURUSD traded in a 1.0449-1.0528 range The Germany Ifo report was a tad gloomy. Business Climate fell to 85.7 in November (86.5 previously), and the Current Assessment fell to 84.3 from 85.4. The results suggest a winter recession is likely.
GBPUSD
GBPUSD gapped higher to start the week, rising from 1.2530 at the NY close to 1.2609 in trading today. Bank of England Deputy Governor Clare Lombardelli remains concerned about inflation. She said, “There are some signs that the process of wage disinflation may be slowing, as shown in Chart 5, so it’s too early to declare victory on inflation.”
USDJPY
USDJPY had another choppy session while trading in a 153.55-154.74 range before dropping to 153.92 in NY. The low was seen at the open and was due to the prospect of a $250 billion fiscal stimulus package, which some analysts suggest paves the way for the BoJ to hike rates in December.
AUDUSD and NZDUSD
AUDUSD traded in a 0.6497-0.6551 range. Prices gapped higher at the open but fully retraced the move in Europe. NZDUSD followed suit in a 0.5836-0.5869 range and traded in a 0.5823–0.5861 range with traders ignoring Retail Sales and Trade data.
USDMXN
USDMXN traded lower in a 20.2591-20.4454 range, and it is at the bottom of that band in NY. Traders are hoping that the Treasury Secretary pick will temper some of Trump’s aggressive tariff plans for Mexico.
BTCUSD (Bitcoin)
BTCUSD continues to flirt with the elusive 100,000 level but stayed close, trading in a 95,611-98,690 range.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
7.1918 vs exp. 7.2257 (prev. 7.1942
Shanghai Shenzhen CSI 300 fell 0.46% to 3848.09
The People’s Bank of China (PBoC) injected CNY 900 billion into the financial system through its one-year Medium-term Lending Facility (MLF). This was despite CNY 1.45 trillion in MLF loans maturing. The PBoC maintained the MLF interest rate at 2.0%.
Chart: USDCNY and USDCNH
Source: Investing.com
