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USD / CAD - Canadian dollar flying high

Published 2024-08-26, 07:53 a/m
USD / CAD - Canadian dollar flying high
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Baystreet.ca - - US Durable Goods Orders released today.

- Powell’s comments spark flurry or “risk-on” trades

- US dollar under pressure from aggressive Fed rate cut expectations.

USDCAD: open 1.3510, overnight range 1.3499-1.3516, close 1.3514, WTI $75.55, Gold, $2525.05

The Canadian dollar rallied sharply and hung to most of Friday’s gains in a somewhat subdued overnight session. USDCAD plunged from a peak of 1.3618 on Friday to 1.3499 which was also its overnight low in a frantic move sparked by Fed Chair Jerome Powell.

Mr. Powell was at his dovish best when he delivered the keynote speech at the Kansas City Fed’s Jackson Hole Symposium. Mr Powell all but announced a September rate cut when he said, “The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.” He justified his comments by noting that “The upside risks to inflation have diminished. And the downside risks to employment have increased.”

The market reaction was not only fast and furious, but any concerns about rate increases were “Gone in 60 Seconds.” The S&P 500 soared 1.15%, the US dollar index (DXY) plunged from 101.44 to 100.49, gold (XAUUSD) surged to $2518.36 from $2484.49 and the US 10-year Treasury yield sank to 3.66%.

The party continued overnight, more or less. Australia’s ASX 200 rose by 0.76% and Hong Kong’s Hang Seng index climbed 1.06%, Japan’s Nikkei 225 index dropped by 0.66% on yen weakness. European bourses are mostly positive but with small gains and S&P500 futures are up 0.10%.

EURUSD is stabilizing within the 1.1170-1.1202 range after surging from 1.1105 to 1.1190 on Friday following Powell’s speech at Jackson Hole. The German Ifo Sentiment Index dropped to 87 from 88.6 in June, but traders largely overlooked Germany’s economic challenges.

GBPUSD retained its Friday gains, trading within the 1.3183-1.3225 range. On Friday, Bank of England Governor Andrew Bailey remarked that “The second-round inflation effects appear to be smaller than we expected. But it is too early to declare victory,” hinting that he is in no rush to reduce UK rates.

USDJPY experienced a sharp decline on Friday, dropping from 146.50 to 144.05, and continued to slide overnight, trading between 143.45 and 144.47. The currency was pressured by hawkish comments from BoJ Governor Ueda, suggesting that Japanese rates could still rise, combined with Powell’s confirmation that US rates are on a downward trajectory.

AUDUSD traded within a 0.6770-0.6798 range, with gains supported by Powell’s dovish outlook on US rates and the RBA minutes indicating policymakers’ hesitation to cut rates.

US Durable Goods Orders are expected to rise 4.0% m/m in July compared to -6.7% in June

This content was originally published on Baystreet.ca

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