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USD / CAD – Canadian dollar drifting into Retail Sales

– Canadian Retail Sales expected to have fallen 0.2% y/y in September.

– Unofficial “Black Friday” in US will lead to light market activity.

– US dollar opens mixed but still rangebound.

USDCAD: open 1.3687-91, overnight range 1.3681-1.3712, close 1.3692, WTI $76.75, Gold, $1996.02.

The Canadian dollar had another quiet, rangebound overnight session. That’s because yesterday’s market closures in Japan and in the US for Thanksgiving drained liquidity from the market. Thanksgiving is a huge US holiday, and many Americans schedule the entire week off, or make an extended long weekend by skipping Friday.

That was evident in Asian markets overnight. The major equity indexes closed in positive territory, but the gains were modest. European equity indexes are trading in a similar fashion, but other than the UK FTSE 100 index (-0.21%), are posting small gains. Wall Street looks like it will open in positive territory as the S&P 500 futures are up 0.11%.

Canada’s September retail sales report is due this morning and expected to show a drop of 0.2% y/y compared to a gain of 0.1% in August. The news should not affect Canadian dollar trading because: 1) it is stale, 2) Wednesday’s CPI data showed inflation trending lower, 3) BoC Governor Macklem suggested interest rates have peaked.

Mr. Macklem’s comments have ensured that the retail sales report is ignored because the result won’t do anything to change the interest rate outlook. Nevertheless, Mr. Macklem’s proclamations have a history of being completely out-to-lunch, so traders may be cautious.

Markets could react to today’s S&P Global Manufacturing PMI (forecast 49.8 vs. Oct. 50) and Services PMI (forecast 50.4 vs. 50.9 in October).

EURUSD traded in a 1.0895-1.0920 band. Germany’s GDP fell 0.4% y/y, a touch worse than the -0.3% expected, while the German IFO data was also uninspiring. Business Climate, Current Assessment, and Expectations indexes missed the forecast but still managed to top October’s figures. However, economists at ING dismissed the results, saying they didn’t mean that the German economy was recovering but meant it may be finding a bottom.

GBPUSD caught a bid and rallied in a 1.2524-1.2571 range. This week’s Autumn update and its announcement of some tax cuts, combined with yesterday’s better than forecast PMI data, encouraged GBP demand. That view was reinforced overnight when the GfK Consumer confidence index rose six points to -24. Joe Staton, Client Strategy Director, said, “Consumer confidence strengthened in November with improvements across all measures.”

USDJPY tracked higher US 10-year Treasury yields and climbed from 149.19 to 149.72. The 10-year yield closed at 4.41% on Wednesday and is currently sitting at 4.667% in NY.

AUDUSD climbed from a 0.6550-0.6573 range, supported by improved risk sentiment. In addition, AUDUSD is underpinned by recent hawkish comments by RBA Governor Michel Bullock

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