October 23, 2024
- BoC rate decision and MPR on tap.
- IMF lowers global growth
- US dollar trades sideways and opens mixed.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3821, overnight range 1.3815-1.3829, close 1.3819
Its decision day in Canada. No, not the “will the Liberal party turf Trudeau decision, ” but will today’s Bank of Canada rate cut be 25, 50, or even 75 bps?” The betting is on 50 bps which also helps to explain why USDCAD is trading at 1.3821. The BoC also releases updated forecasts in its quarterly Monetary Policy Report which are expected to show falling inflation and rising unemployment.
Economists at the International Monetary Fund (IMF) boosted Canada’s growth outlook in 2025, to 2.4% from 1.3% previously.
WTI oil prices are firm, rising from 71.31 to 71.67, with the peak seen in Asia and the low in NY. Israel has reportedly decided how it will retaliate against Iran and traders believe a strike is imminent, which could disrupt oil supplies. The API reported a 1.64 million barrel increase in US crude inventories yesterday.
FX markets are relatively bullish US dollars due to rising treasury yields and poor risk sentiment from geopolitical issues and the US elections. However, those reasons are also driving many traders to the sidelines.
US home sales data is released this morning.
USDCAD technicals
The intraday technicals are unchanged. They are bullish while trading above 1.3810 and looking for a break above 1.3850 to extend gains to 1.3900 then the August peak of 1.3945. A move below 1.3810 suggests a retest of the 1.3750 area. The 1.3750 or 1.3950 level may be tested today, depending on the size of the BoC’s rate cuts. A 50 bp cut is largely prices in, which suggests limited upside, while a 25 bp cut would see a retest of 1.3750, in a hurry. A 75 bp cut (unlikely) would put 1.4000 in play.
Longer term, the move above 1.3660 which is the 61.8 % Fibonacci retracement of the 2020-2021 Covid range, targets the 78.6% level of 1.4085
Today’s Range 1.3750-1.3900
Chart: USDCAD daily
Source: Investing.com
Hot Air Mass Blankets Washington
The IMF and World Bank conferences are in Washington, where every delegate is offering their perspective on the global growth outlook. The IMF’s 2025 global growth forecast is 3.2%, a slight drop from the 3.3% predicted in July. (ho-hum). The IMF expressed concerns over rising protectionism, clearly aimed at the US and Donald Trump. A host of G-7 central bankers will be sharing their views today and tomorrow.
Big Mac Attack
Global equity traders are treading cautiously ahead of earnings reports from Tesla, Coca-Cola, and Boeing. The DJIA and S&P 500 both closed flat, with E.coli infections across 10 states linked to McDonald’s weighing on sentiment. Asian equity markets were mixed, with Australia’s ASX 200 and Hong Kong’s Hang Seng gaining 0.13% and 1.27%, respectively, while Japan’s Topix fell 0.55%, partly due to a weakening yen. European bourses are modestly in the red, and S&P 500 futures are down 0.25%. Meanwhile, the US 10-year Treasury yield is trading at 4.24%.
EURUSD
EURUSD hovered around yesterday’s 1.0800 close, moving within a tight 1.0792-1.0806 range. The euro remains under pressure due to the ECB’s dovish stance and steady expectations for the Fed, driven by confidence in a US soft landing. Additionally, the US presidential race is slightly negative for the euro, as Tariff-man Trump leads over Harris.
GBPUSD
GBPUSD is near the top of its 1.2969-1.2992 range, receiving a slight boost after the IMF raised its 2024 growth forecast for the UK from 0.7% to 1.1%. However, further gains are limited by broad demand for the US dollar ahead of the upcoming US presidential election.
USDJPY
USDJPY climbed steadily, advancing from 151.02 to 152.027 in New York. The move is driven by rising US Treasury yields, with the 10-year yield reaching 4.24%. Expectations of a US soft landing and gradual rate cuts contrast with the BoJ’s dovish outlook, though rate hikes are still anticipated.
AUDUSD and NZDUSD
AUDUSD traded lower in a 0.6662-0.6692 range, weighed down by US dollar strength. However, downside risks may be limited as analysts see diminishing odds for further RBA rate cuts in 2024. NZDUSD underperformed AUD, moving between 0.6028 and 0.6092, as the Kiwi was hit by expectations of another RBNZ rate cut in November, reflecting sluggish economic growth.
USDMXN
USDMXN edged higher, trading in a 19.9305-19.9760 range, supported by polls showing Trump leading Harris. Weaker than expected Mexican August retail sales ( actual 0.1%, forecast of 0.2% m/m)had no impact.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: 7.1245 (prev. 7.1223)
Shanghai Shenzhen CSI 300 rose 0.39% to 3973.21
Chart: USDCNY and USDCNH
Source: Investing.com
