– BoC Governor Macklem speaking this afternoon
– Canada Fall Economic Statement today.
– US dollar trading negatively.
USDCAD: open: 1.4242, overnight range,1.4217-1.4239, close 1.4236, WTI $70.14, Gold, $2658.59
The Canadian dollar is sinking and is at its overnight session and year-to-date low. The Bank of Canada and the US Fed have differing monetary policy outlooks, and that is fueling Canadian dollar losses.
The Fed is expected to trim its benchmark rate by 25 bps at Wednesday’s FOMC meeting, while the BoC cut its overnight rate by 50 bps last week. The US economy may be slowing, but the job market is very resilient, and inflation is sticky. It’s a different story in Canada, where the unemployment rate surged, and inflation is very low.
Canadians will find out more about the BoC’s monetary policy view today at 3:30 p.m. when Governor Tiff Macklem delivers his year-end speech titled “Economic Factors Shaping Canada’s Monetary Policy.”
Canada’s Finance Minister Chrystia Freeland follows Mr. Macklem. She tables the Fall Economic Statement and is expected to detail the impact of the previously announced GST/HST holiday. Trudeau promised to send all Canadians with an income of less than $150,000 a cheque for $250.00. According to the National Post, their sources say Ms. Freeland is trying to stay within certain financial benchmarks, so spending another $4.7 billion on an affordability initiative is not workable.
It is a big week for traders, with the FOMC, Bank of England, and Bank of Japan monetary policy decisions on tap.
EURUSD held steady within a narrow range of 1.0486-1.0524, ending near the lower boundary in New York trading. Pressure on the currency increased after ECB President Christine Lagarde reiterated that further interest rate cuts are likely if incoming data supports the baseline scenario. While Germany’s Manufacturing PMI came in weak at 42.5, a slightly better Eurozone PMI reading of 45.2 (compared to the expected 45) provided some balance. Meanwhile, France’s credit rating downgrade by Moody’s to Aa2 from Aa3, citing political instability, added to the euro’s challenges.
GBPUSD moved modestly higher within a 1.2611-1.2671 range, supported by an uptick in house prices to 1.4% year-on-year from 1.2%. However, gains were limited by weaker-than-expected December PMI data at 47.3 (versus a forecast of 48.1). Dovish comments from the ECB president, though largely anticipated, helped keep prices stable.
USDJPY traded between 153.32 and 153.98, settling at 153.78 in New York. Support came from a strong US 10-year Treasury yield of 4.38% and reduced market expectations for the Bank of Japan to hike rates this week.
AUDUSD ranged from 0.6350 to 0.6383, weighed down by continued weak data from China, which signals sluggish economic growth and dampens Australian export prospects. December PMI data for Australia was mostly flat at 50.4.
