Baystreet.ca - - Canadian Retail Sales expected to rise 0.5%m/m in August.
- US Durable Goods data and Consumer Sentiment should support greenback
- US dollar opens mixed, but commodity bloc underperforms.
USDCAD: open 1.3847, overnight range 1.3844-1.3857, close 1.3856, WTI $70.53, Gold, $2721.69
The Canadian dollar drifted lower in a quiet overnight session. Traders continue to digest the divergent Fed and Bank of Canada monetary policy outlooks against the uncertainty of the looming US presidential election and Israel and Iran tensions.
The Bank of Canada outlook is very dovish while the Fed view, not so much. Many FOMC policymakers are saying the favour a gradual pace to interest rate cuts to ensure a soft economic landing. That ship has sailed for Bank of Canada Governing Council members. They are struggling to avoid a recession and with that in mind are expected to cut rates to 3.25% at the December meeting.
Oil prices are bouncing in a 69.98-70.87 range after reports suggesting the US administration has dissuaded Israel from targeting Iran’s oil infrastructure when they retaliate for Iran’s latest attack. In addition there are rumours that Saudi Arabia will ramp up crude production in January despite talk that supply will outstrip demand.
Yesterday’s U.S. data provided some support for the USD, reinforcing that the economy may be more resilient than anticipated. Today’s reports on Durable Goods Orders (with a -0.1% forecast for September) and the Michigan Consumer Sentiment Index (forecast at 69) are expected to uphold this outlook.
EURUSD moved within a 1.0814-1.0838 range, as it consolidates recent losses. ECB officials hinted at a potential 50 bp rate cut in December, with the euro finding additional support from an optimistic Ifo Survey, showing sentiment among German firms rose to 86.5 in October.
GBPUSD maintained a 1.2956-1.2987 range ahead of the upcoming UK budget announcement. Market sentiment remained bearish after a weak GfK Consumer Confidence reading of -21, the lowest this year. Speculation grows around changes to debt calculations that may allow Chancellor Rachel Reeves an extra £50 billion in spending capacity.
USDJPY traded within a 151.46-152.11 range, influenced by mixed inflation data from Tokyo and steady U.S. Treasury yields. BoJ Governor Kazuo Ueda conveyed a dovish stance, suggesting the central bank can carefully assess risks. He also attributed some USDJPY strength to optimism about U.S. growth.
AUDUSD stayed weaker, trading between 0.6618-0.6644, pressured by overall USD strength, though remarks from Australian Treasurer Jim Chalmers, crediting policymakers with achieving a “soft landing,” offered some underlying support.