Baystreet.ca - - US core-CPI expected to be unchanged in November.
- GBPUSD rallies on soft inflation numbers.
- USD consolidates lower following tame PPI data on Tuesday.
USDCAD: open 1.4346, overnight range 1.4329-1.4364, close 1.4348, WTI $76.46, Gold, $2688.46
The Canadian dollar gained following cooler than expected US PPI data which suggested the Fed may not need to sit on the sidelines as long as previously expected. Traders are hoping for a similar result from today’s US CPI data. Forecasts are for core CPI to range between 0.2% to 0.4% m/m in December. The actual result will be a binary event. The US dollar will rally and stocks fall if it is at or above the top end, and the reverse will happen if it comes in at the bottom or lower.
Asian equity markets closed with Australia’s’ ASX 200 index down 0.22%, and Japan’s Topix up 0.31%. The FTSE 100 index is up 0.74% and is leading European indexes higher. The US 10-year Treasury yield dipped to 4.76%.
The Canadian dollar is under significant pressure. Following her weekend meeting with Trump, Alberta Premier Danielle Smith returned with a stark warning: Trump’s threat to impose 25% tariffs on Canadian imports is highly likely to become a reality. Canada needs a clear plan to address this uncertainty.
WTI oil prices traded cautiously, chopping about between $76.16 and $77.15. Prices were underpinned by a reported 2.6 million barrel drawdown from API data but capped by a possible de-escalation of tensions in the Middle East.
EURUSD struggled to make gains and is trading near the bottom of its 1.0287-1.0317 overnight range. The topside was capped after dovish remarks from ECB. Vice President Luis de Guindos who stated, “The policy trajectory is clear, and we expect to continue to further reduce the restrictiveness of monetary policy. The latest information suggests that the economy is losing momentum.”
GBPUSD caught a bid and rallied in a 1.2161-1.2241 range by a rise in Gilt yields as the UK’s fiscal challenges drew attention. The yield rise came aftercooler than expected UK inflation numbers. Core CPI rose by 3.2% y/y (forecast 3.4%).
USDJPYNY dropped to 156.71 from 158.08 after Bank of Japan Governor Kazuo Ueda strongly signaled a potential rate hike at the January 24 policy meeting. Ueda stated, “We are currently analyzing data thoroughly and will compile the findings in our quarterly outlook report. Based on that, we will discuss whether to raise interest rates at next week’s policy meeting and would like to reach a decision.”
AUDUSD traded in a 0.6181-0.6212 due to improved risk sentiment.
Canada releases Manufacturing and Wholesale Sales data today.