– Bank of Canada Governor Tiff Macklem hints at 50 bp rate cut
– Trump assassination attempt ignored by market.
– US dollar slides and CAD underperforms.
USDCAD: open 1.3580, overnight range 1.3566-1.3598, close 1.3587, WTI $68.19, Gold, $2586.06
The Canadian dollar lost some ground against the US dollar since Friday’s NY open, and it was the only major G-10 currency to do so. Extremely dovish remarks by Bank of Canada Governor Tiff Macklem over the weekend sealed its fate.
Mr. Macklem was interviewed by the UK Financial Times on Sunday; he tossed a 50 bp rate cut onto the table. The Governor is very concerned about Canada’s slowing economy and the negative risks posed by the employment outlook and soft oil prices. He told the interviewer that “the labor market is pointing to some downside risks,” and then followed up by saying if growth doesn’t unfold as expected, “it could be appropriate to move faster on interest rates.” He added that there was “enough slack in the economy to bring inflation back down to target,” then said, “We don’t want to see more slack.”
The Governor was also very concerned about the prospect of a sharp cycle of lower oil prices, as a prolonged period of low prices would have a “big impact” on the economy. WTI traded in a 67.70-68.60 range overnight, with support from production disruptions by Hurricane Francine starting to wane.
Donald Trump survived another assassination attempt unscathed, but the news had little impact on markets.
The recent spate of mixed-to-weak US economic data has led interest rate futures traders to raise the odds of a 50 bp Fed rate cut on Wednesday to 58%, which is putting negative pressure on the US dollar.
EURUSD gained momentum, advancing from 1.1075 to 1.1130 as traders speculated that the Federal Reserve’s pace and magnitude of rate cuts would surpass those expected from the European Central Bank (ECB).
GBPUSD is enjoying a positive movement, climbing from 1.3121 to 1.3202. The rise is supported by broad US dollar softness and growing expectations that the Bank of England will hold rates steady at its upcoming meeting on Thursday.
USDJPY traded with a bearish bias within a 139.58-140.95 range, driven by increased speculation of a 50 bp rate cut from the Federal Reserve on Wednesday, while the Bank of Japan is expected to maintain its current rates during Friday’s meeting. Japanese markets observed lower-than-average trading volume due to the Respect for the Aged Day holiday.
AUDUSD continues to rise, trading between 0.6703 and 0.6745. Renewed chatter around a potential 50 bp rate cut from the Fed, along with the Reserve Bank of Australia’s minutes hinting at the possibility of a rate hike, are providing support. However, soft economic data from China is acting as a headwind, limiting further gains.
There are no top tier US or Canadian economic releases today.
