Baystreet.ca - - BoC cut rates by 50 bps in a sign that the economy is weak
- Fed on track to cut rates by 25 bps next week.
- US dollar trading sideways but slightly weaker.
USDCAD: open 1.4145, overnight range,1.4131-1.4161, close 1.4161, WTI $70.25, Gold, $2710.64
The Canadian dollar is trading today, right where it was before the Bank of Canada slashed the overnight rate by 50 bps on Wednesday, taking it to 3.25% from 3.75% in October. This marks the second consecutive 50 basis point reduction, underscoring the severity of the country's economic difficulties.
The latest monetary policy statement highlights these concerns. Governor Tiff Macklem revealed that the economy grew by only 1% in the third quarter, while the unemployment rate rose to 6.8% in November.
Compounding these challenges, the government plan to reduce immigration targets are expected to hinder growth further as will new 25% U.S. tariffs if Trump follows through on his threat.
Oil prices climbed yesterday and consolidated the gains in a 70.12-70.72 range overnight.
Prices were boosted after Opec slashed its oil demand forecast for 2024 due to China’s sluggish economy. Opec cut its 2025 forecast of oil demand growth to 1.45 million bpd from 1.54 million bpd.
Yesterday US inflation data came out as expected which kept a 25 bp rate cut on the table at next week’s FOMC meeting.
EURUSD traded within a tight range of 1.0492-1.0531 as the market awaited the European Central Bank's rate decision. A 25 bp rate cut is widely expected although speculation about a larger cut increased following a surprise 50-bp rate cut by the Swiss National Bank.
GBPUSD traded quietly in a 1.2740-1.2788 band, with traders awaiting the ECB decision. Meanwhile, the Bank of England is anticipated to hold rates steady at its meeting next week, which helps to limit GBPUSD downside.
USDJPY remained in a narrow band between 151.95 and 152.79, following some news stories that indicated that the Bank of Japan is likely to maintain its current policy rates at the upcoming meeting.
AUDUSD climbed from 0.6369 to 0.6430 after a stronger-than-anticipated employment report. Australia gained 35,600 jobs in November, surpassing the 25,000 forecast, while the unemployment rate fell to 3.9% from 4.1%. These results reduced the likelihood of a February rate cut by the Reserve Bank of Australia to a 50/50 chance.
Today’s US data includes weekly jobless claims and PPI.