– BoC Governor testifies to Parliament today.
– Focus is on US election, not data.
– US dollar opens defensively as it consolidates recent gains.
USDCAD: open 1.3880, overnight range 1.3876-1.3901, close 1.3889, WTI $67.95, Gold, $2752.49
The Canadian dollar drifted sideways in an uneventful overnight session as FX traders adopt a wait and see approach to the US election. Bank of Canada Governor Tiff Macklem takes center stage this morning with his testimony to the House Finance Committee. He will be explaining the BoC’s decision to cut interest rates by 50 bps on October 23. Yesterday he told an audience in Toronto that the 50 bp rate cut was a logical step in light of the aggressive rate hikes earlier. He said ““It makes sense to take some bigger-than-normal steps when you’ve taken some really big steps on the way up.” He is likely to repeat those comments today.
The oil prices slide that happened after Israel’s retaliatory attack on Iranian military sites has halted for the time being, as weak long WTI positions were cut. However upside gains may be limited due to fears that Opec’s planned production increases will lead to an oil oversupply, especially as China’s crude demand ebbs.
EURUSD traded within a narrow 1.0805-1.0827 range overnight, constrained by rising U.S. 10-year Treasury yields against a backdrop of dovish sentiment around the ECB. ECB official Luis de Guindos tried to counter the dovish perspective by highlighting “substantial risks” related to inflation but failed to sway sentiment.
GBPUSD moved within a 1.2959-1.2990 range with traders appearing cautious ahead of Wednesday’s UK budget announcement. Meanwhile, a 0.8% drop in the BRC Shop Price Index had minimal impact, diverging from forecasts of a 0.5% decline.
USDJPY drifted in a 152.75-153.46 band with prices underpinned by a higher U.S. 10-year Treasury yield which rose to 4.314%. Japan’s unemployment rate inched down to 2.4% from August’s 2.5%.
AUDUSD slipped within a 0.6558-0.6586 range and is currently balanced mid-band in New York trading. Last week’s comments from RBA Governor Michelle Bullock, hinting at restrictive interest rates for the next “year or two,” provided some support. However, concerns over China’s economic outlook and a generally strong U.S. dollar are keeping AUD under pressure.
Today’s calendar is packed with U.S. economic reports, featuring October’s Consumer Confidence and the JOLTS Job Openings survey, along with the Redbook Index, Housing Price Index, and Case-Shiller Home Price Indices. Among these, JOLTS is expected to attract the most attention as the Federal Reserve watches for signs of softening in the labor market. However, with the upcoming U.S. election, markets may push economic concerns to the sidelines for now.
