– Low oil prices are weighing on Loonie.
– US 10-yeaqr Treasury yields near recent low.
– US dollar opens steady as commodity bloc currencies underperform.
USDCAD: open 1.3786-90, overnight range 1.3782-1.3807, close 1.3794, WTI $75.93, Gold, $1946.94
The Canadian dollar continues to suffer due to sharply lower oil prices which extended this week’s losses overnight and ongoing US dollar strength against the G-10 majors.
No one is more perplexed at the drop in crude prices than Opec. On the weekend, Saudi Arabia announced that it planned to extend its voluntary productions cuts until the end of this year and the Saudi oil minister said that crude consumption is healthy. Russia knows that because, despite pledging to cut its production by 300,000 b/d, its shipments are close to a four-month peak.
The Canadian dollar isn’t getting any support from the risk of higher domestic rates. The recent Summary of Deliberations from the Bank of Canada disclosed a central bank grappling with the decision to maintain steady interest rates amidst persistent and potentially escalating inflationary pressures. The report cautioned that exorbitant governmental expenditure might necessitate elevated rates, noting that such spending could obstruct efforts to rein in inflation by disproportionately accelerating demand relative to supply growth.
Carolyn Rogers, the Senior Deputy Governor, is scheduled to present an update on financial stability in Vancouver at 9:00 am Pacific Time.
EURUSD peaked at 1.0716 in Asia, traded sideways until just before NY opened, then dropped to 1.0680 in NY. The ECB Bulletin didn’t provide any new insights, noting that it maintained interest rates due to a steady inflation outlook and a commitment to their 2% target using a data-driven approach.
GBPUSD traded choppily in a 1.2258-1.2309 range with the peak seen after comments from Bank of England Chief Economist Huw Pill. He said it was crucial to leave rates at 5.25% for an extended period to drive inflation to its 2.0% target. The rally didn’t last and GBPUSD dropped to its session low in early NY trading.
USDJPY is at the top of its 150.77-151.19 range despite lower treasury yields. The strength is partly due to disappointment from BoJ officials continuing to suggest that the exit from negative interest rates and ending the yield curve control strategy is still far into the future.
AUDUSD drifted quietly in a 0.6396-0.6421 range. Traders are digesting mildly positive risk sentiment from the drop in US Treasury yields but it is offset by data suggesting China’s economy continues to struggle.
US weekly jobless claims are expected to be 218,000, compared to 217,000 last week