– Trading subdued ahead of US inflation data Wednesday.
– UK and EU data disappoints.
– US dollar opens mixed but mildly bid.
USDCAD: open: 1.3575-78, overnight range: 1.3570-1.3594, close 1.3576, WTI $88.03, Gold 1919.02
The Canadian dollar is consolidating yesterday’s gains after another uneventful overnight session. Traders are patiently awaiting the release of the US August inflation report on Wednesday and until then, just do not want to get involved.
The CPI report should provide a lot of drama as economists are expecting a surge in the headline number to 3.6% y/y from 3.2% in July. However, Core-CPI (ex-food and Energy) is expected to drop to 4.3% y/y from 4.7%. The Core reading is the most important from the Fed’s perspective which should take the sting from the rise in the headline number. However, at 4.3%, core-CPI is still more than double the Feds mandated target of 2.0%
Those results may lead to another risk seeking rally in stocks while driving the greenback lower as they would suggest that the Fed is done with raising rates.
The Canadian dollar is also getting a bit of a lift from higher oil prices. West Texas Intermediate (WTI) is at $8810, just below the overnight peak of $88.24/barrel. Prices are underpinned by news of a supply disruption in Libya which serves to increase the impact of the Opec and Russia production cuts.
EURUSD traded in a 1.0712-1.0768 range, getting a pre-ECB meeting pop in Asia before retracing the move in Europe. The ECB will likely leave rates unchanged at Thursday’s meeting, although the odds of such a move are close to 50/50.
GBPUSD traded sideways in Asia, then dropped to 1.2464 from 1.21530 in Europe following the UK employment report. The unemployment rate was unchanged at 4.0%, employment fell by 207,000, while average hourly wages including bonuses rose 8.5%, beating the forecast for an 8.2% increase. ING analysts said the details were weak as the wage gains were all in the public sector. The results suggest the Bank of England may deliver a dovish rate hike next week.
USDJPY traded nervously in a 146.44-144.96 range as traders continued to digest the weekend’s aggressive verbal intervention by Ministry of Finance and Bank of Japan officials. The US 10-year Treasury yield is steady at 4.28%, which helped to limit losses.
AUDUSD was indecisive and traded in a 0.6416-0.6442 range. Weak economic data limited gains. The ANZ Consumer Confidence was down 1.1 points to 77.6, while the Westpac Consumer Confidence measure was -1.5% compared to -0.4% in August.
There is no US data of note, today.