Yesterday, USDCAD held an uneventful 1.2450 – 1.2494 range. The pairing climbed to 1.2520 in the Asian session amidst general USD strength after it was announced that the U.S. Senate approved a $4 trillion budget taking a step closer to the highly anticipated U.S. tax reform. (Republicans now need a 51% majority vote in the Senate to pass a tax bill.) USDCAD dropped back towards 1.2480 just ahead of the 5:30am Canadian retail sales and inflation releases. Although inflation nudged higher in September, retail sales for August missed badly and USDCAD immediately spiked to 1.2550. The pairing has continued higher breaking above Monday's 1.2590 high. After making marginal gains to 1.2609 – the highest since Aug. 31 – USDCAD has eased back to 1.2588 but looks to be making a 2nd run at the highs. The next key announcement that will impact the CAD comes Wednesday with the Bank of Canada interest rate announcement. There is little chance of another interest rate hike next week although there is still about a 50% probability of a rate hike in December.
World stocks set a fresh record high before stalling in Europe on Thursday, as the longest winning streak for Japanese stocks since 1998 and the first close above 23,000 for Wall Street's Dow index helped to offset nerves in Spain. Traders were marking 30 years to the day since the 1987 Black Monday stock market crash but there couldn't have been a greater contrast as equity markets have continued to clock up milestone after milestone. The Nikkei enjoyed its 13th straight daily rise, helping the MSCI index of global stock markets – now up 17.6 per cent for the year – add to its long list of record highs. It wasn't all one-way traffic, though. European shares took their biggest tumble in almost two months after a new batch of third-quarter results brought some disappointments. The other big currency market move came from the New Zealand dollar. It was sent skidding to its lowest since May after the left-leaning Labour Party won the support of the minor nationalist New Zealand First party to form a ruling coalition.
The greenback's advance over the past 3 days helped send volatility in major currencies to a 3-month low. Fed funds futures indicate a roughly 80% chance that U.S. policy makers will raise rates at their December meeting, up from 72% Friday. President Donald Trump's choice for the next Fed chair will be unveiled before he leaves Nov. 3 for an 11-day trip to Asia and Hawaii, a person familiar with the process said Tuesday. John Taylor was said to have impressed Trump in an interview, buoying gains in the greenback earlier this week given the assumption by many that he would favour tighter policy. European Union officials are expressing frustration with the U.K. on Brexit negotiations, saying lack of consensus within the Britain government makes it hard to know what the latter wants. While ministers in Theresa May's government have played down internal divisions, the European side see little room for progress at the leaders summit starting tomorrow.
World equity markets held close to record highs on Tuesday, as investors latched on to rising bets on higher borrowing costs in the U.S. and Britain. Reports that U.S. President Trump might pick Stanford University economist John Taylor to lead the Fed after Janet Yellen's term ends next year sent two-year Treasury yields to their highest since 2008 and pushed up the dollar. That meant European bonds started in the red too while the euro was down for a fourth straight day for the first time since May. Taylor is an advocate of a rules-based approach to interest rate policy that would likely see official Fed rates much higher than at present – at least 3.5 per cent according to some economists.
Steve Brown, Senior CoThe USD was the worst performing currency this week with the majority of losses coming Friday on the back of weaker than expected retail sales and inflation data. The pricing of a December interest rate hike fell marginally to 82% while the market considers if the U.S. Fed can in fact raise interest rates 3 times in 2018 as indicated by their latest "dot plot" forecast. USDCAD opened the week near 1.2527 and basically traded sideways with numerous forays both above and below the 1.2500 level. After testing the 1.2530 level on Wednesday, USDCAD dropped to 1.2432 in early Thursday trade. Higher than expected U.S. producer price inflation saw the USD broadly rally taking USDCAD back up towards 1.2490. On Friday, U.S. CPI inflation and retail sales missed the mark broad-based USD weakness resulted in USDCAD dropping from 1.2510 down to 1.2450 before climbing to briefly test the 1.2520 level. The pairing subsequently eased lower to close the week near 1.2465.rporate Trader | Stevebrown@vbce.ca
The dollar weakened, longer-maturity U.S. debt gained and U.S. stocks hit record highs after traders interpreted the minutes from the last Federal Reserve meeting as slightly dovish even though policy makers are expected to raise rates again this year. Reserve Chair Janet Yellen reiterated the case for gradual interest rate increases, after Friday's weak inflation data added to the growing weight of evidence that structural headwinds are limiting pressures. Catalonia's President Carles Puigdemont insisted the illegal referendum on Oct.1 gives his government a mandate to found a new republic, and called for a face to face meeting with the Spanish prime minister. The robust defense of the region's claim for independence may spur Madrid to press ahead with the process of suspending self-rule within days. U.K. Prime Minister Theresa May will visit Brussels today in a bid to unlock Brexit talks, ahead of a crunch summit with European Union officials later this week. It comes amid a cross-party effort by British lawmakers to stop the government from pushing through a no-deal divorce, which would trigger a renewed slide in the GBP/USD to $1.10, according to Mizuho Bank Ltd.
Yesterday, USDCAD initially dipped from 1.2460 down to 1.2430 (a 1 week low) in Asian trade before climbing to 1.2490 in North American trade. The pairing would then dip to 1.2450 and hold near 1.2475 for the balance of the session. Overnight, the USD broadly gained ahead of the 5:30am retail sales and CPI inflation data taking USDCAD up to 1.2510. Both data sets missed estimates sending the USD lower across the board. USDCAD dropped to session lows @ 1.2450 but has since recovered up to 1.2485 making the CAD the worst performing currency on the day. This comes despite an earlier 2% climb in oil prices as commodity prices along with the AUD and NZD outperform. U.S. 10 year yields are under pressure again falling to 2.28% after testing 2.40% earlier this week. After the dovish comments on inflation in Wednesday's Fed minutes along with missed inflation expectations today, the market appears to be doubtful that the Fed will be able to hike interest rates 3 times next year.
THE DOLLAR SAGGED ON THURSDAY AFTER THE U.S. FEDERAL RESERVE SHOWED A MORE GUARDED VIEW TOWARDS INFLATION, BUT THAT DID NOT DERAIL A RALLY IN STOCK MARKETS THAT PUSHED ASIAN SHARES TO THEIR HIGHEST IN A DECADE. AGAINST A BASKET OF SIX MAJOR CURRENCIES, THE DOLLAR WALLOWED AT ITS LOWEST IN MORE THAN TWO WEEKS AFTER MINUTES FROM THE FED'S SEPTEMBER MEETING SHOWED POLICY MAKERS HAD A PROLONGED DEBATE ABOUT THE PROSPECTS OF A PICKUP IN INFLATION AND THE PATH OF FUTURE INTEREST RATE RISES IF IT DID NOT. WHILE THIS DID NOT COOL MARKET EXPECTATIONS FOR A HIKE IN DECEMBER – WHICH STAND AT AROUND 80 PER CENT, ACCORDING TO CME'S FEDWATCH TOOL – IT DID MAKE INVESTORS RE-EVALUATE THE LONG-TERM PATH FOR POLICY IN THE WORLD'S LARGEST ECONOMY.
THE SPANISH GOVERNMENT HAS MAINTAINED ITS HARD LINE ON CATALAN SECESSION AFTER THE PRESIDENT OF THE REGION YESTERDAY BACKED AWAY UNILATERALLY DECLARING INDEPENDENCE. PRIME MINISTER MARIANO RAJOY CONVENED AN EXTRAORDINARY MEETING OF HIS CABINET THIS MORNING, AND STARTED THE PROCESS THAT MAY SPUR THE SUSPENSION OF THE REGIONAL GOVERNMENT. HE IS SEEKING FURTHER CLARIFICATION FROM CATALAN ABOUT ITS INDEPENDENCE INTENTIONS. THE DECISION BY CATALAN SEPARATISTS TO DEFER ITS DECLARATION HAS SPURRED A RALLY IN THE COUNTRY'S STOCKS AND BONDS, WHILE THE EUR ROSE TO ITS HIGHEST LEVEL IN MORE THAN A WEEK. PRESIDENT DONALD TRUMP SAID THAT HE WILL ADJUST HIS TAX PLAN IN THE COMING WEEKS WITHOUT SPECIFYING WHAT THE ADJUSTMENTS WOULD BE. THE TIGHT LEGISLATIVE ARITHMETIC MEANS THAT THE ADMINISTRATION WILL HAVE TO TREAD CAREFULLY TO AVOID ALIENATING ANY MORE THAN 2 GOP SENATORS. THE RECENT FEUD BETWEEN THE PRESIDENT AND SENATOR BOB CORKER WON'T HELP THE PASSAGE OF THE FISCAL PLAN.
Steve Brown, Senior Corporate Trader | Stevebrown@vbce.ca
The USD was the top performer this week while the CAD managed gains vs. the EUR, GBP, and AUD. USDCAD was neutral for much of the week with several attempts to break above the 1.25 level stalling between the 1.2500 -1.2538 area and pulling back to near-term support in the 1.2447 – 1.2480 area. On Thursday, trade data showed that the Canadian trade deficit widened by $430 million (it was expected to narrow by $380 million) and USDCAD climbed from 1.2461 up to 1.2585 during the session. On Friday, another month of strong Canadian employment data combined with mixed results in the U.S. saw USDCAD decline from 1.2600 down to 1.2527. The GBP was the worst performing currency this week losing 3.5 cents on Brexit woes and confidence issues surrounding PM Teresa May. The AUD also lagged as the RBA kept interest rates unchanged while retail sales declined for the 2nd consecutive month. Also notable, for the 4th consecutive week, the CAD displayed little correlation to oil prices which declined 5% from $51.69 down to $49.11.
WORLD SHARES GROUND OUT A FRESH RECORD HIGH ON TUESDAY, MAKING IT ALMOST 50 FOR THE YEAR, ALTHOUGH EUROPE TREAD CAUTIOUSLY AS MARKETS WAITED TO SEE WHETHER SPAIN'S CATALONIA REGION WOULD PUSH FOR INDEPENDENCE LATER IN THE DAY. JAPAN AND SOUTH KOREA RETURNED FROM EXTENDED BREAKS TO GIVE ASIA A LIFT, BUT THE CATALAN UNCERTAINTY MEANT IT WAS A LOWER START FOR THE EURO ZONE'S MAIN BOURSES AND FOR SPANISH BOND MARKETS. CATALONIA'S SECESSIONIST LEADER CARLES PUIGDEMONT IS DUE TO ADDRESS THE REGION'S PARLIAMENT IN BARCELONA. HE COULD ASK THE ASSEMBLY TO VOTE ON A UNILATERAL DECLARATION OF INDEPENDENCE FROM MADRID.
Yesterday, USDCAD dipped from 1.2495 down to 1.2460 before racing up to 1.2550. After a brief correction down to 1.2518, the pairing climbed to 1.2579/84 and held near 1.2565/75 for the duration of the session. Despite a 2%+ jump in oil prices, the CAD suffered broad losses after the August trade deficit surprisingly widened from $2.98 billion to $3.41 billion. The market was expecting the deficit to narrow to $2.60 billion. The USD was the best preforming currency overnight taking USDCAD up to 1.2596 before falling back to 1.2565 ahead of the 5:30am jobs release. Canadian data was solid with 112,000 full time jobs added while the U.S. data was mixed – weak headline showed a loss of 33,000 jobs in September offset by stronger than expected wage inflation. After a quick spike to 1.2600, USDCAD dropped quickly to 1.2540. A few rebound attempts stalled in the 1.2570/80 range and the pairing has since eased to session lows near 1.2538. The CAD is currently the best preforming currency on the day.
Global stocks came off record highs and the euro held near a seven-week low on Thursday as investors prepared to parse minutes from the European Central Bank's last meeting for clues to its exit from ultra-easy monetary policy. Political tensions emanating from Spain, where one of its richest regions Catalonia has pledged to declare 'independence in days', was also at the forefront of concerns for European markets. Meanwhile poor Canadian trade numbers has currently hit the Canadian dollar this morning.
Advisors to President Donald Trump have given him a final list of candidates to take over as Federal Reserve chair when Janet Yellen's term ends early next year. Former Fed Governor Kevin Warsh, who has drawn fire from both left and right, is among the leading candidates. Jeffrey Gundlach, the head of DoubleLine Capital, said that Federal Reserve Bank of Minneapolis President Neel Kashkari will get the job, which would no doubt catch markets off guard. While it was another day, another record high for U.S. stocks yesterday, the momentum has not carried across the workd. In Europe, the Stoxx 600 Index was down 0.2% at 2:50am as Spanish markets again led the losses, while S&P 500 futures also slipped. The 10 year Treasury yield was at 2.318% and gold was higher. Overnight, the MSCI Asia Pacific Index gained 0.3% while Japan Topix index closed unchanged. At 11:15am today, Yellen speaks at an event at the Federal Reserve Bank of St. Louis.
Steve Brown, Senior Corporate Trader | Stevebrown@vbce.ca
Early in the week, USDCAD climbed from 1.2311 up to 1.2414 before falling back to 1.2328. The pair was driven higher by some hawkish comments by U.S. Fed Chair Yellen on Tuesday morning however comments from Canadian Finance Minister suggesting that the Canadian economy "can continue to do well with the CAD at these levels" prompted a quick reversal down towards 1.2328 Tuesday afternoon. The pairing would then rally the very next day after Bank of Canada Governor Poloz came across as "neutral" in his comments with regards to the outlook for further interest rate hikes. USDCAD broke above the 1.2414 resistance level and made gains in early Thursday trade to 1.2519 before retracing all the way back to the 1.2414 level. Canadian GDP for July out Friday morning was flat (vs a 0.1% expected gain) and USDCAD rallied higher making marginal new monthly highs @ 1.2525/30 before falling back towards the 1.2460 level. Again for the 3rd consecutive week, the CAD displayed little correlation to oil prices which gained another 5% to $52.85 for a total monthly gain of over 13%.
World shares hit their latest in a run of record highs on Tuesday, while the dollar was at it loftiest in 1-1/2 months as encouraging U.S. data lifted it in tandem with global bond yields. MSCI's 47-country 'All-World' index which contains more than 2,400 firms was pushed to the fresh peak as Europe's main bourses added to gains made in Asia and after Wall Street set its own record close again overnight. It was the tenth new high since late July alone and extends the year's blizzard of records that started in February to more than 40 with no sign it is about to run out of steam yet.
Spanish bonds dropped and Madrid's IBEX Index was 1.2% lower by 5:50am EST as markets assessed the fallout from yesterday's independence vote in the Catalonia region. Tensions remain high in the aftermath of heavy-handed tactics of state police in trying to stop the vote, which had been declared illegal by the country's constitutional court, and the results that showed 2 million of the 2.3 million votes cast were in favour of secession. Separatist leaders signaled they may be moving towards a unilateral declaration of independence as early as this week. While this week's data are dominated by non-farm payrolls on Friday, there will be something for central-bank watchers ahead of that number. On Wednesday, Fed Chair Janet Yellen will speak as the Federal Reserve Bank of St. Louis. Investors will watch closely to see if the recent focus by Fed officials on financial asset-price rises -which some suggest may lead to interest rate hikes despite low inflation- continues. On Thursday, the European Central Bank publishes the minutes of its September meeting, which will be read for clues on asset-purchase tapering.
Daydreaming about a Mexican beach vacation is almost a national pastime, especially as the weather turns from gorgeous summer days to chilly fall temperatures--not to mention in the depths of winter. But once you've booked your time in the sun, daydreaming needs to take a backseat to planning for a while. That way, you can make sure your trip lives up to your expectations, and that all of the logistics go smoothly.
One aspect of logistics you'll need to handle ahead of your trip is financial: specifically, you'll want to ensure you have Mexican pesos on hand as soon as you land in your destination, and for the duration of your trip. Carrying the local currency comes with many benefits, so you'll need to plan ahead to have it with you.
At 11am the Federal Reserve will publish its latest monetary-policy decision. While markets are expecting no change to rates, investors will be looking for details on how the central bank intends to start shrinking its $4.5 trillion balance sheet as well as the so-called dot plot, which indicates the path ahead for interest-rate increases. The announcement will be followed 30 minutes later by a press conference with Chair Janet Yellen. Market futures show a rate hike by the end of the year is seen as a coin flip by investors.
Investors were moving back into the euro and European government debt. An early flurry of activity saw the euro pop to a near two-year high versus the Japanese yen of 134.14 yen. The Bank of Japan also meets this week but unlike the Fed is expected to signal it will keep its stimulus program in full. JP Morgan Asset Management portfolio manager Iain Stealey said markets were now fully set for the Fed to officially announce it will cut, or taper, the amount it reinvests from the profits of its $4.2-trillion crisis-era bond portfolio.