Baystreet.ca - - Geopolitical tensions on display
- Canada September GDP expected to rise 0.3% compared to 0% in August.
- US dollar weighed down by month end flows.
USDCAD: open 1.4006, overnight range,1.3981-1.4018, close 1.4016, WTI $68.27, Gold, $2662.78
The Canadian dollar squeezed out gains in a thin overnight session as many traders were sidelined because of the US Thanksgiving holiday. However, those that were working, sold US dollars across the board which was mainly due to the usual month end portfolio rebalancing flows. The November surge in the S&P of around 5.7% means managers need to sell US dollars to bring their portfolios in line with their mandates.
Canada September GDP is expected to have risen by 0.3% compared to a flat reading in August. However the impact of today’s data is muted due to recent events including the Donald Trump election victory and the latest fiscal stimulus announcement by the Federal government.
Asian stock markets showed mixed performance, with Australia's ASX 200 edging down by 0.10% and Japan's Topix declining by 0.24%. Hong Kong's Hang Seng Index managed a modest gain of 0.29%, buoyed by optimism around potential stimulus measures. European markets remained largely unchanged, while S&P 500 futures advanced by 0.28%. In the bond market, the 10-year U.S. Treasury yield eased slightly, falling from 4.25% to 4.20%. Gold (XAUUSD) experienced a notable rally, climbing $25.60
EURUSD slipped to 1.0549 from 1.0597, as traders continue to debate whether the European Central Bank will cut rates by 25 or 50 basis points at its December 12 meeting. Despite a slight increase in Eurozone Core HICP inflation, analysts believe the ECB will likely proceed with rate cuts, given the region's persistently weak economic activity. The EURUSD technical outlook remains bearish, with a potential test of support at 1.0370 on the horizon.
GBPUSD traded choppily in a 1.2682 to 1.2750 range, initially gaining strength due to portfolio rebalancing flows favoring the pound. However, profit-taking activity reversed some of these gains, as traders viewed the US dollar's recent weakness as an opportunity to buy.
USDJPY dropped from 151.56 to 149.54 before recovering to 150.05, driven by rising inflation data from Tokyo. Excluding food and energy, core inflation climbed to 2.2% in November from 1.8% in October, while the headline inflation rate surged to 2.6% from 1.8%. These developments heightened expectations for a potential 25 basis point rate cut by the Bank of Japan in December.
AUDUSD traded in a narrow range between 0.6492 and 0.6520 amid light trading, supported by month-end demand. Comments from Reserve Bank of Australia Governor Michelle Bullock, emphasizing that inflation remains too high for rate cuts, also helped underpin the Australian dollar.