October 31, 2024
- Canada GDP flat, as expected, July’s result downgraded to 0.1%.
- US data overshadowed by election
- US dollar opens little changed from yesterday.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3920, overnight range 1.3899-1.3922, close 1.3904
USDCAD is attempting to break above resistance in the 1.3940-50 zone, and Bank of Canada Governor Tiff Macklem is doing his part to ensure the attempt is successful.
Mr. Macklem told the Senate Banking Committee that another 50 bps rate cut is likely. He stated, “We’re taking it one meeting at a time. We’ve demonstrated we’re prepared to do a 50-basis-points cut if we think that’s appropriate. And if we think it’s appropriate to do it again, we’ll do it again.”
Mr. Macklem is probably concerned about the latest federal government plan to cut immigration. The Globe and Mail writes that the sharp jump in the population in recent years is 100% responsible for keeping the Canadian economy afloat. Consequently, cutting immigration suggests lower growth, and Canada’s GDP is already very soft.
USDCAD is also underpinned by US GDP data that underscored the strength of the US economy, which served to highlight Canada’s growth shortcomings. That shortcoming was underscored today when August GDP came out flat while July’s result was downgraded from 0.2% to 0.1%. Statistics Canada said “The manufacturing sector was the largest detractor to growth in August, decreasing 1.2%, with both durable goods and non-durable goods manufacturing contributing to the decline.”
USDCAD Technicals
The intraday USDCAD technicals are bullish with the break above 1.3910 keeping the focus on resistance at 1.3950. A topside break suggests a move to 1.4010 while a move below 1.3910 targets 1.3860.
The October uptrend channel is intact with the base at 1.3890 and the peak at 1.4070.However, momentum studies and Commitment of Traders positioning data suggest USDCAD is overbought, which may act as a drag on further gains.
For today, USDCAD support is 1.3910 and 1.3860. Resistance is 1.3950 and 1.3990.
Today’s Range 1.3880-1.3970
Chart: USDCAD 4 hour
Economic Data Impact
US jobless claims fell by 12,000 to 216,000 from 228,000 while Core PCE inflation remained unchanged at 2.7%, a tick higher than expected. The Employment Cost Index dipped to 0.8% from 0.9%. However, Tuesday’s US election is what’s driving markets today and the greenback was little changed following the data.
“I Got a Rock”
Charlie Brown’s Halloween experience is rather unhappy because instead of getting candy or chocolate bars from houses in his neighborhood, he got a rock. Republicans and Democrats are having their own Charlie Brown moment, but both groups are being covered in garbage. A comedian at Trump’s Madison Square Garden rally referred to Puerto Rico as an island of garbage. President Biden rushed to take the high road and chirped, “the only garbage I see floating out there is his supporters.” Oops. It’s one thing to denigrate around 5 million people, but it is a whole different level when you insult 50% of the population. Kamala Harris was rumored to mutter, “Damnit Joe, stop helping me.”
“What’s Next?”
Equity investors are hard to please. Just ask Microsoft and Meta management. Both companies reported better-than-expected Q3 earnings, and their stock got spanked in overnight markets. Investors only want to hear rosy growth forecasts from potential AI benefits.Asian equity indexes closed lower in cautious trading, with Japan’s Topix losing 0.30% due to the BoJ decision, while Australia’s ASX 200 lost 0.25% due to US election caution. European bourses traded negatively, led by a 0.72% drop in the UK FTSE as investors expressed unhappiness with the latest UK budget. The French CAC 40 fell 0.80%, and the German DAX is down 0.61%. S&P 500 futures are down 0.77%, while the US 10-year Treasury yield is at 4.283%.
EURUSD
EURUSD is trading at the top of its 1.0844-1.0869 range following hotter-than-expected Eurozone inflation, which jumped to 2.0% y/y compared to 1.7% in September (forecast 1.9%). The results put a damper on expectations that the ECB will cut rates by 50 bps on November 14. The single currency is also underpinned by robust German retail sales numbers (actual 3.8% y/y vs 2.1% in September).
GBPUSD
GBPUSD traded with a modestly bullish bias in a 1.2944-1.2999 range as traders digest the latest UK “tax and spend” budget. GBPUSD sank, soared, then sank again in a 1.2936-1.3034 range yesterday as Chancellor Rachel Reeves announced plans to generate £40 billion in new tax revenue while increasing borrowing by changing the way government debt is measured. Gilt traders are nervous and drove the 10-year Gilt level down to 4.3227% today from 4.839% yesterday.
USDJPY
USDJPY traded lower in a 151.93-153.59 range after the Bank of Japan left rates unchanged and Governor Ueda indicated he still planned to raise rates. Prices rebounded to 152.47 in NY due to caution ahead of the US election and Japanese political issues.
AUDUSD and NZDUSD
AUDUSD traded poorly, falling from 0.6580 to 0.6564, where it sits in NY. Weaker-than-expected Australian retail sales, which rose just 0.1% compared to the consensus forecast for a 0.3% increase, weighed on the currency. NZDUSD is trading negatively in a 0.5964-0.5984 range due to broad US dollar strength following yesterday’s US GDP data. News that NZ Business confidence rose to 66 from 61 barely registered.
USDMXN
USDMXN traded sideways but with a bid in a 20.0829-20.1890 range as it consolidated gains following the US GDP data. Traders discounted news that Mexico’s Q3 GDP rose more than expected (actual 1.50% y/y) because it was still well below the 2.1% previously and due to the belief that the growth will not be sustained. Bloomberg economists suggest that nationalist government policies and lower public-sector investment will be a drag on growth.
Source: Investing.com
China Snapshot
PBoC fix: 7.1390 (prev. 7.1283)
Shanghai Shenzhen CSI 300 fell 0.090% to 3889.45
NBS Manufacturing PMI (Oct) 50.1 vs Exp. 49.9 (Prev. 49.8). Non-Manufacturing PMI Oct 50.2 vs Exp. 50.4 (Prev. 50.0). These are the “official government statistics” and likely skewed higher to suggest that the earlier stimulus package announcements were working. Believe them at your peril.
Chart: USDCNY and USDCNH
Source: Investing.com
