– US October CPI expected unchanged at 0.2% m/m
– Global markets treading cautiously in wake of Trump re-election.
– US dollar opens mixed but remains on a firm footing.
USDCAD: open 1.3958, overnight range,1.3941-1.3963, close 1.3945, WTI $68.69, Gold, $2608.89
The Canadian dollar traded quietly in a dull overnight session with today’s release of US October inflation data.
The Canadian dollar is vulnerable in a Trump administration especially after he announced plans for a 10% across the board tariff despite trade agreements. The US has a very diverse economy while Canada’s is mostly resource based. If Canadians face higher tariffs on imported goods from the US, domestic prices will rise, the economy will weaken, and the Bank of Canada may be forced to raise rates. That fear will limit Canadian dollar gains in the next few months.
US inflation data is the focus this morning. A CPI outcome above expectations could strengthen the US dollar, especially given potential inflation from Trump’s proposed tariffs. Traders are currently building up US dollar positions, though a CPI reading below expectations might lead to some pullback.
Fed officials are tempering expectations of substantial rate cuts. Minneapolis Fed President Neel Kashkari mentioned the possibility of a “higher than expected neutral rate” as a rationale for restraining rate cuts, adding that inflation may take “a year or two” to achieve the 2% target. The October CPI is projected to rise 0.2% month-over-month, staying consistent with September.
EURUSD moved within a 1.0593-1.0630 range and currently stands at 1.0614 in New York. In the absence of key Eurozone economic reports, economic growth disparities and interest rate uncertainties are guiding its trajectory. Should CPI fall short of expectations, EURUSD could experience a rally toward 1.0700 as traders take profits.
GBPUSD stayed within a narrow 1.2729-1.2756 range. Recent UK employment data was not soft enough to dissuade the Bank of England from considering rate cuts, mainly because wage growth remains high. Bearish technical indicators persist as long as GBPUSD stays below 1.2850.
USDJPY continued its climb, advancing from 154.51 to 155.24 on the back of rising US yields. The 10-year yield increased from 4.32% to 4.45%, then consolidated near 4.42% overnight. Despite expressing concern about “excessive moves” last week when USDJPY passed 155.00, BoJ officials have not reacted to this latest breach above that level.
AUDUSD hovered between 0.6514 and 0.6540 as traders awaited the US inflation report. The currency is also weighed down by concerns that Trump’s proposed tariffs on China could slow Chinese economic growth. Australia’s employment report, expected tomorrow, may provide further direction.
