The Bank of Canada walked back some of its enthusiasm about the economic outlook as it kept interest rates unchanged, suggesting there may be less urgency to tighten monetary policy. The central bank kept its overnight benchmark rate at 1.75%, reiterating it expects to eventually remove all monetary stimulus from the economy. But its statement was more guarded than the last one in October and cited the possibility that recent negative economic developments may mean the economy isn't running up as much against capacity constraints as previously thought. The less-confident tone is an acknowledgment of growing risks, particularly in the oil sector, to what has largely been a strong expansion, casting doubt on whether the economy can cope with higher borrowing costs. The CAD has plunged 0.85% since the announcement this morning. The U.S. stock markets are closed today for national day of mourning following the death of former President George H.W. Bush.
Steve Brown, Senior Corporate Trader | Stevebrown@vbce.ca
The CAD was near the back of the pack this week with the AUD and USD leading the way. On Monday the USDCAD rate initially dropped from 1.3230 down to 1.3186 on positive market sentiment and a 3% jump in oil prices. However the move below 1.32 was short-lived and USDCAD climbed higher through Wednesday morning. A break above the previous week high of 1.3320 triggered a quick move to 1.3360 – just shy of the 2018 June high of 1.3386. The trend abruptly changed Wednesday morning with dovish comments from the U.S. Fed Chairman Powell sending the USD down about 1% across the board. U.S. yields fell towards 3 month lows as Chairman Powell said that U.S. interest rates were "just below" neutral. Back in October, Powell had mentioned that the U.S. rates were "a long way" from neutral. USDCAD dropped to 1.3242 accordingly. USDCAD tested the 1.3312 level on Thursday before falling back to 1.3256. Despite Canadian GDP meeting expectations on Friday, a 4% drop in oil prices to 13 month lows saw USDCAD briefly test 1.3333. The USMCA trade agreement was officially signed and the pairing moved back to close the week near 1.3280.
The rally in risk assets sparked by the trade truce faded as investors grew skeptical that the U.S. and China made any meaningful breakthrough. The Treasury yield curve continued to flatten and the dollar retreated.
The S&P 500, Dow Jones and Nasdaq indexes all gave up a chunk of yesterday's gains at the New York open, while the Stoxx Europe 600 Index slipped led by automakers. Stocks tumbled in Japan and dropped in Australia and South Korea after media appearances from Trump administration officials on Monday shed little light on the specifics of any Sino-American trade agreement. Shares in Shanghai and Hong Kong fared better, fluctuating before ending higher as the yuan climbed.
Stocks climbed after the U.S. and China declared a truce in their trade war, while Treasuries and the USD fell. Oil surged on optimism producers will cut output. The Dow, Nasdaq and S&P were off their session highs, while European and Asian shares advanced following agreement by the leaders of the two countries to hold off on new tariffs and intensify trade talks. Stocks rose after President Donald Trump said that China will "reduce and remove" tariffs on imported American-made cars. The U.S. had been scheduled to push ahead on Jan. 1 with increased tariffs on $200 billion worth of Chinese goods. Ten-year Treasury yields rose back above 3% while the euro was stronger. Oil was jolted higher by efforts across the globe to support prices as Saudi Arabia and Russia extended their pact to manage the market and Canada's largest producing province ordered unprecedented supply cuts. Optimism was dented slightly after Qatar said it was leaving OPEC, just as the group prepares to meet this week. Elsewhere, the pound erased a gain as the threat of a vote to bring down British Prime Minister Theresa May's government looms should Parliament reject her Brexit deal. That raises the stakes even further as lawmakers begin debating her plan this week. China's yuan climbed with emerging market assets.
Yesterday, USDCAD dropped from 1.3287 down to 1.3253 before spiking up to 1.3309. Oil prices briefly broke below the psychological $50 level – a 3% drop to $49.38 – the lowest price since October of 2017. Oil prices then rallied by 5.5% to $52.20 and USDCAD dropped back towards session lows. Overnight, USDCAD climbed to 1.3320 before falling back to 1.3290 ahead of the Canadian GDP report. Q3 data came in as expected although September GDP saw a slight contraction. USDCAD climbed to 1.3328 before falling back to 1.3295. Oil prices dropped below $50 again – down nearly 4% on the day but have since recovered by 2% sending USDCAD back to 1.3333 and back down to 1.3285. The USMCA trade agreement was officially signed at the G20 meeting earlier this morning while the market looks for a cooling of trade tensions with U.S. / China trade talks to be held this weekend
U.S. stocks halted a three-day rally as investors awaited developments in the trade war with China and assessed the impact of falling Treasury rates. The S&P 500 fell following the biggest gain in eight months Wednesday that was fueled by a dovish tone from Federal Reserve Chairman Jerome Powell. Banks and tech companies paced the decline. The 10-year Treasury yield dropped to the lowest level in two months, while the dollar slid for a second day ahead of a sit-down between Presidents Donald Trump and Xi Jinping that could be pivot point in the trade war between the two countries.
U.S. stocks turned higher, though advances were muted amid the latest salvos from President Donald Trump in the trade war and ahead of a highly anticipated Federal Reserve speech. The S&P 500 Index clung to a third straight gain, led by health-care equipment makers and software firms. Banks weighed on major averages ahead of Chairman Jerome Powell's noontime speech in New York that will be scrutinized for clues on rate hikes. Goldman Sachs Group Inc. warned that traders who view recent Fed commentary as dovish may be misinterpreting the central bank's intentions. The 10-year Treasury yield rose with the dollar. Trade also remained in focus, with automakers tumbling after President Donald Trump threatened tariffs and renewed his haranguing of General Motors for closing U.S. plants. Trump heads to the Group of 20 meeting tomorrow where investors will look for progress in his trade war with China. In Europe, the pound advanced as U.K. Prime Minister Theresa May appeared to back down in a key Brexit battle with Parliament.
Beaten-down tech shares led the rebound in U.S. stocks, while Treasuries fell as investors gained confidence from positive political developments in Europe and rising oil prices. The S&P 500 Index rallied back from its worst week in a month, led by FAANG shares. The 10-year Treasury yield rose amid signs of progress in two standoffs that have continually rattled markets -- Italy's fiscal woes and Brexit -- and ahead of a slew of Federal Reserve speakers this week, including chair Jerome Powell. The dollar edged higher, while West Texas crude rallied above $51 a barrel following a more than 7% slide on Friday. Italy's bonds jumped as state officials began studying scenarios for a lower 2019 budget deficit target. The pound gained after European Union leaders signed off over the weekend on the proposed Brexit plan. Investors will scour this week's Fed speech and policy minutes for clues on the future of rates. After stock markets skidded last week, and with bond traders reducing expectations for the pace of U.S. monetary policy tightening, Fed Chairman Jerome Powell has the opportunity to shed light on prospects for a pause in a speech Wednesday. The sit-down between Presidents Xi Jinping and Donald Trump has heightened hopes of a resolution to the trade war ahead of the next escalation of tariffs.
Yesterday, USDCAD dropped from 1.3245 down to 1.3181 – close to this week's opening levels (1.3141) and well off Tuesday's 5 month high of 1.3318. Overnight, USDCAD climbed back to 1.3241 ahead of the Canadian retail sales and inflation releases as oil prices plunged 6%+ from $54.09 down to $50.58 – a 13 month low. Over the past 7 weeks oil prices have fallen by 35% while USDCAD has climbed from 1.28 up to 1.33 over that time. Canadian retail sales rebounded more than expected in September while October inflation jumped more than expected. USDCAD dropped to 1.3188 on the data before climbing to session highs at 1.3259 – just shy of last week's triple-top @ 1.3264. Although oil prices have only marginally recovered to $51.26, USDCAD has retraced back down to 1.3215.
European stocks declined on Thursday and U.S. equity futures edged lower in a subdued day of trading thanks to the American Thanksgiving holiday. The pound jumped and the euro strengthened after the U.K. and EU agreed the final bit of their Brexit deal. The Stoxx Europe 600 Index gave up a chunk of Wednesday's advance as almost every sector fell, though the intraday trading volume was below the 30-day average and the gauge came off its lows. Asian equity benchmarks swung between gains and losses before turning higher, with Japanese stocks getting an end-of-session boost on a report about a possible government rebate. Trading volumes in the region were also depressed. U.S. futures fluctuated before turning lower, though moves were contained.
U.S. stocks climbed with tech rallying, trimming sharp losses across asset classes in Tuesday's session. Treasuries rose and the dollar weakened after MNI reported the Federal Reserve is considering ending a cycle of interest rate hikes as early as the spring. All major equity benchmarks were higher, with the Nasdaq indexes pacing gainers and erasing more than half of Tuesday's decline. Consumer discretionary shares and communications services companies paced the increases in the S&P 500 Index. Trading was lighter than normal in the pre-Thanksgiving session. In addition, U.S. data showed that durable goods orders declined and filings for unemployment benefits rose. Banks and telecommunications companies led an advance in the Stoxx Europe 600 Index as optimism for a compromise on Italy's budget buoyed stocks. The euro gained and Italian bonds firmed on reports the Italian government may be open to budget revisions as the European Union took a first step toward imposing fines on the country. Oil rebounded from a one-year low that briefly sent it below $54, even as U.S. President Donald Trump urged Saudi Arabia to keep reducing prices. Investors are weighing industry data that showed U.S. crude inventories unexpectedly fell last week against doubts about OPEC's plans to cut output.
The sell-off in U.S. stocks picked up steam, with investors dumping the tech darlings that carried the bull market for much of its record run. Treasuries advanced with the yen.
The S&P 500 slid to the verge of a correction, the Nasdaq Composite erased its gain for the year, and the Dow Jones Industrial Average shed more than 400 points as angst spread across global equity markets. Investors pointed to escalating trade tension, signs of a looming slowdown in retail growth and cracks in the credit market, but an indiscriminate dumping of the year's biggest winners still largely characterized the action., with investors dumping the tech darlings that carried the bull market for much of its record run. Treasuries advanced with the yen. The S&P 500 slid to the verge of a correction, the Nasdaq Composite erased its gain for the year, and the Dow Jones Industrial Average shed more than 400 points as angst spread across global equity markets. Investors pointed to escalating trade tension, signs of a looming slowdown in retail growth and cracks in the credit market, but an indiscriminate dumping of the year's biggest winners still largely characterized the action.
On Friday, USDCAD dropped from 1.3187 down to 1.3127 – a 7 session low before closing the week near 1.3150. Broad-based USD selling continued today with the USD index falling to an 11 day low. Oil prices gave up early gains falling $2 on reports Russia wants to play a wait and see approach towards proposed oil production cuts. Equity markets have turned sharply lower during North American trade and USDCAD has moved higher to test the 1.3200 level. Pull-backs have been limited to 1.3170 thus far.
Yesterday, USDCAD dropped from 1.3250 down to 1.3156 – a 1 week low. GBPCAD dropped more than 4 cents on Brexit concerns after 7 key UK cabinet members resigned. Overnight, the GBP recovered while the USD broadly weakened with the USD index falling to a 7 session low – it had been hovering near a 17 month high earlier this week. USDCAD tested 1.3190 in early North American trade before falling to 1.3127 after better than expected Canadian manufacturing data. The pairing has since bounced back towards 1.3160.
U.S. stocks opened lower as California utilities continued to reel from the wildfires that have swept the state. The pound plunged the most since June 2017 as the Brexit process again threw the U.K. government into chaos. West Texas crude extended Wednesday's rebound from a record losing streak. Treasuries gained. For all the worries assailing investors -- on top of Brexit is the ongoing trade dispute and Italian budget stress -- they are at least receiving a steady message from the U.S. central bank. In a question-and answer session late Wednesday, Powell played down recent turbulence in equities, saying volatility was only one of many factors that the Fed takes into account.
Yesterday, USDCAD had a volatile session initially falling from 1.3245 down to 1.3215 before climbing to 1.3260 – a 4 month high. The pairing would then fall to 1.3220 before re-testing the 1.3260 level a 2nd time and subsequently falling back to 1.3220. Despite the fact oil prices plunged nearly 11% from Monday's high (from $61.26 down to $54.75) the CAD held up fairly well. There was some broad-based USD weakness overnight taking USDCAD from 1.3250 down to 1.3207 after U.S. inflation data came in largely as expected. A report from a senior house democrat that the USMCA trade deal would need to be changed saw USDCAD spike higher re-testing the 1.3260 level for a 3rd time in the past 24 hours. The pairing has since fallen back towards 1.3230.
U.S. stocks recouped some of the previous session's losses on hopes for progress in the American-Chinese trade dispute, even as Asian shares dropped overall. Crude oil headed for the lowest close this year. The S&P 500 Index opened higher Tuesday, led by technology shares. The market mood was buoyed after a report that China's Vice Premier Liu He will visit the U.S. to pave the way for a meeting between the leaders of the two biggest economies later this month, which also supported some commodity currencies. The Dow Jones Industrial Average and Nasdaq 100 gained.
U.S. stocks slumped as investors considered what a tumble in oil prices means for the economy. The dollar extended a gain and gold dropped after a report showed producer prices rose more than forecast in October.
Mexico's stock market fell for a second day and its bonds slid with the peso as investors grow concerned about the incoming president's plans for the economy. Europe's main equity gauge dropped after disappointing forecasts from Richemont and Thyssenkrup AG. Treasury yields edged lower after the Federal Reserve on Thursday reiterated its plan for "further gradual" rate increases.
Yesterday, USDCAD had a volatile Asian session trading between 1.3103 – 1.3159 as the U.S. midterm results filtered in. Once it was confirmed that the Democrats had won the House, broad-based USD weakness took USDCAD down to 1.3056. USDCAD remained below 1.3100 in early North American trading before a climb to 1.3120 as oil prices dropped to 8 month lows and U.S. equity markets surged higher. Range-trading prevailed again overnight with USDCAD holding a narrow 40 pt. range as markets await the 11:00am U.S. Fed interest rate policy statement.