Baystreet.ca - - Risk aversion shift halts stock market rally
- Canada inflation likely climbed in October.
- US dollar sell-off stalls on Putin threats.
USDCAD: open 1.4021, overnight range,1.4003-1.4107, close 1.4016, WTI $68.80, Gold, $2634.91
The Canadian dollar sell-off halted abruptly yesterday, and a wave of profit-taking gave the loonie a boost. Even so, the gains are likely temporary ahead of an expected Bank of Canada rate cut in December and the threat of a new trade war by the incoming Trump administration.
Canadian inflation data takes center stage. CPI is expected to have risen by 1.9% y/y in October, which is above the 1.6% result seen in September. Core CPI is forecast to be unchanged at 2.4%. The results should only have minimal impact because inflation is well within the BoC’s 1-3% target band. Policymakers are far more concerned about economic growth, and the September data is not available until November 29.
Oil prices continue to be a non-event. WTI drifted higher in a 68.49-69.38 band, but nothing really changed. The outlook for slow growth in China reducing its demand, combined with OPEC’s plans to boost prices, will continue to cap gains.
Russian President Putin’s threat to use nuclear weapons that came after President Biden authorized Ukraine to fire U.S.-made missiles into Russian territory triggered a spate of risk-aversion trading. Gold prices (XAUUSD) jumped from 2610.45 to 2636.56, while the Japanese yen and Swiss franc rallied. In addition, U.S. bonds were in demand, and the yield on the U.S. 10-year Treasury fell to 4.34% from 4.42%. European stocks also took a hit, with the French CAC 40 dropping 1.15% while U.S. S&P 500 futures fell 0.40%.
EURUSD pair bounced in a 1.0524-1.0601 band, with the highest level reached during early Asian trading. Prices dropped from the peak after Putin’s comments. HICP inflation data met expectations and had little impact.
GBPUSD chopped about in a 1.2614-1.2689 range, with the peak seen in Asia and a subsequent drop into the New York opening. Sterling found some support from remarks by Bank of England policymaker Megan Greene, who emphasized that underlying inflation pressures call for caution in cutting interest rates.
USDJPY fell from 154.70 to 153.28 due to a mix of safe-haven demand and BoJ rate hike expectations.
AUDUSD traded negatively in a 0.6682-0.6525 range. The Reserve Bank of Australia's minutes from its November 5 meeting offered no new signals, and rates are not expected to be lowered until May 2025.
Today’s U.S. data includes Housing Starts and Building Permits.