Baystreet.ca - - US CPI data overshadows debate.
- USDJPY gives back all of its 2024 gains.
- US dollar retreats modestly, post-debate.
USDCAD: open 1.3588, overnight range 1.3556-1.3579, close 1.3610, WTI $67.41, Gold, $2523.25
The Canadian dollar is the yoyo, and the greenback is the yoyo-er. Prevailing US dollar sentiment on any given day determines what tricks the yoyo-er does, like “walking the dog”, going “around the world” or even ”rocking the baby.”
That sentiment was front and center overnight when the Canadian dollar rallied after traders determined that Kamala Harris eked out a win against Donald Trump in last night’s presidential debate. But there are still 55 days until the election and the debate performance will just be a distant memory. Traders have already moved on and are focused on what today’s US August inflation report will mean to the outlook for US interest rates and ultimately the US dollar.
US Core-CPI is expected to be unchanged at 3.2% y/y, which will put a damper on any joy from a lower headline reading (forecast 2.6% y/y, July’2.9%) The Cleveland Fed Nowcast of CPI as of September 10 predicts core-CPI will rise 0.27% m/m compared to 0.26% y/y. If the results are higher than expected the odds of a 50 bp Fed rate cut next week will drop to close to 0.
WTI oil is still under pressure but saw a modest increase, trading within a 65.92-67.58 range overnight. Prices received some support from reports that 24% of crude and natural gas production in the Gulf of Mexico is offline due to Hurricane Francine.
Asian equity indexes closed with losses across the board. Japan’s Nikkei 225 index fell 1.49% while Australia’s ASX 200 index lost 0.30%. European traders were more positive a 0.55% rise in the German Dax index is leading the pack higher. S&P 500 futures are flat.
EURUSD is trading near the top of its 1.1016-1.1052 range as markets anticipate the US inflation report today and the ECB monetary policy meeting tomorrow.
GBPUSD saw modest gains within a 1.3070-1.3112 range during Asian trading, but the momentum reversed in Europe after disappointing UK economic growth data. July's GDP was stagnant at 0.0%, unchanged from June, and fell short of the 0.2% m/m forecast. Both Industrial Production and Manufacturing Production also missed expectations.
USDJPY, has erased all of its gains for the year. The sharp overnight drop from 142.48 to 140.72 was driven by hawkish remarks from BoJ official Junko Nakagawa. She left the door open for a potential rate hike on September 20, stating that "with real interest rates currently very low, we will adjust the level of monetary support to sustainably and stably achieve our 2% inflation target, provided our economic and price forecasts are met."
AUDUSD drifted aimlessly within a 0.6640-0.6670 range ahead of this morning’s US inflation report.