– Canadian dollar falling in tandem with S&P 500 futures
– Canadian banks and Federal government closed today
– US dollar ending September with strong gains.
USDCAD snapshot: open 1.3693-97, overnight range 1.3660-1.3744, close 1.3685, WTI $81.61, Gold $1667.70
The Canadian dollar did not have a good month of September, losing 4.0%. Even so, it was still better than the Australian dollar (down 5.0%) and the New Zealand dollar (down 6.6%) which was the worst performing major G-120 currency against the US dollar.
The Canadian dollar direction is determined by global risk sentiment as measured by S&P 500 prices. S&P futures are unchanged compared to Thursdays close, but the S&P 500 index plunged nearly 8.0% in September.
The monthly loss points to US dollar demand as portfolio manager rebalancing positions.
EURUSD traded sideways in Asia then dropped in Europe falling from 0.9853 to 0.9756 in NY. Fears over Russian’s plan for Ukraine offset news that Eurozone inflation hit 10.0% y/y in September, stoking talk of aggressive ECB rate hikes. EURUSD technicals are bearish below 0.9850.
GBPUSD survived the “mini-budget” crisis and the currency pair reached last Friday’s level overnight. Alas, the rally was not sustained with prices falling from 1.1233 to 1.10.53 in NY. The rally began after news of an emergency meeting between Prime Minister Liz Truss, Chancellor Kwasi Kwarteng, and members from the Office of Budget Responsibility. The gains were underpinned by UK Q2 GDP rising 0.2% q/q compared to estimates for a 0.1% dip.
Some analysts thought the government would make a U-turn from the recently announced tax cuts. No joy, and GBPUSD fell.
USDJPY drifted in a 144.22-144.76 range. Support from better-than-expected Japanese data and elevated risk sentiment was offset by tumbling US Treasury yields.
AUDUSD traded defensively, dropping to 0.6523 in Asia to 0.6466 in NY, due to month end flows.
There is a lot of US data to fuel additional uncertainty in FX and equity markets. The Fed’s favourite inflation measure, Personal Consumption Expenditure (PCE,) is expected to rise 6.6% y/y (previous 6.3%) and keep the “higher rates for longer” debate alive. The Michigan Consumer Sentiment Index (forecast unchanged at 59.5) rounds out the data dump.