Baystreet.ca - - Trump haunting markets
- US ISM PMI on tap
- US dollar resumes rally after Friday’s sell-off.
USDCAD: open 1.4038, overnight range,1.3991-1.4049, close 1.4027, WTI $68.68, Gold, $2635.81
The Canadian dollar rally ended as quickly as it started. On Friday, month end demand for Canadian dollar stemming from portfolio rebalancing flows boosted the loonie while traders decided to overlook the weaker than expected GDP growth in September.
The Canadian economy grew just 0.1% compared to the forecast for a 0.3% result. Canadian economists wrote that the results were nothing to be concerned about. CIBC (TSX:CM) suggested that the underlying details were more positive while BMO (TSX:BMO) economists believe that tax relief will boost spending, providing a sunnier outlook. The reality is that none of that matters. The results are stale and refer to a pre-Trump 2.0 era.
Prime Minister Trudeau flew to the Florida White House were President-elect Trump is presiding. The media is reporting that Trudeau promised Trump Canada would improve border security. Trump’s said "Prime Minister Trudeau has made a commitment to work with us to end this terrible devastation."
Today’s focus shifts to the US ISM Manufacturing PMI report. The forecast is for an increase to 47.5 from 46.5, which is a move in the right direction. However, any number below 50 suggests the economy is still contracting.
Oil prices traded in a 67.67-68.95 range as renewed hostilities in Syria and better than expected Chinese PMI data raised hopes for increased demand. However, planned Opec production increases in January limited the gains.
EURUSD traded negatively in a 1.0496-1.0574 range, pressured by weak Eurozone economic data and political uncertainty in France. The French parliament is at odds over the Prime Minister's budget proposal, with Marine Le Pen's National Party pushing for a non-confidence vote. Meanwhile, European Central Bank policymakers hinted at the need for further rate cuts, adding to the euro's challenges.
GBPUSD rallied within a 1.2679-1.2737 range, driven by EURGBP selling amidst the French political turmoil. Positive Nationwide Housing Price data initially supported the pound, but weaker-than-expected November PMI at 48, compared to a forecast of 48.6, erased much of the optimism. S&P painted a bleak outlook for the UK manufacturing sector, citing high costs, reduced demand, and geopolitical uncertainties as key challenges. The report also warned that recent policy changes, such as increased employer national insurance, could further strain conditions in 2025.
USDJPY remained steady in the middle of its 149.50-150.75 range. Bank of Japan Governor Ueda hinted at a potential rate hike in December but tempered expectations by highlighting uncertainties surrounding the US economic outlook. He also noted that current economic data supports the BoJ's projections.
AUDUSD traded sideways within a 0.6489-0.6515 range, with gains limited by renewed US dollar strength. October Retail Sales increased by 0.6% m/m, beating expectations, while Building Permits rose by 4.2%, significantly surpassing the forecast of a 2.1% gain. However, PMI remained unchanged at 49.4, signaling persistent economic headwinds.