USD / CAD - Canadian dollar trading sideways.
- BoC Governor declares rates have peaked-sort-of
- Slow trading day due to US Thanksgiving
- US dollar inches lower overnight, but well within recent ranges.
USDCAD: open 1.3682-86, overnight range 1.3651-1.3698, close 1.3689, WTI $76.38, Gold, $1993.70.
The Canadian dollar continues to bounce erratically inside this week's well-defined range but it trades with a slightly bullish bias.
Bank of Canada Governor Tiff Macklem spoke about“Ending the pain of high inflation” in Saint John, New Brunswick, yesterday.
The media jumped all over his comment, "The tightening of monetary policy is working, and interest rates may now be restrictive enough to get us back to price stability." Headlines and news reports led with“Governor Macklem says rates have peaked.”
That's not quite accurate. He qualified his statement by saying that if high inflation persists, we are prepared to raise rates. So more accurately,“rates have peaked, unless they haven't.”
It's not like we haven't seen this movie before. He left rates unchanged for two consecutive meetings (March and April), which at the time, fueled speculation that rates had peaked. Then he hiked rates twice more. With that track record, it's hard to trust his comments.
His speech was self-congratulatory. Macklem highlighted the Bank of Canada's response to inflation, saying the series of interest rate hikes have begun to cool the overheated economy and alleviate inflationary pressures.
However, Macklem also cautioned that if high inflation persists, the Bank is prepared to increase rates further. He stressed the balance the Bank seeks to maintain between over- and under-tightening. While acknowledging the risks of excessive tightening, which could lead to unnecessary economic hardship, he also recognized the dangers of insufficient action that could prolong inflationary harm and necessitate even higher rates later.
Canadian dollar traders did not seem concerned when WTI oil prices plunged to $74.10/barrel yesterday after the US Energy Information Administration (EIA) reported an 8.7 million barrel surge in crude inventories in the week ending November 17. Prices rebounded overnight but gains were hampered after OPEC delayed a planned meeting from November 26 to November 30. Analysts speculate that the delay suggests the rumored production cuts that are expected to be announced will be smaller than previously anticipated.
The US Thanksgiving holiday and a Japanese holiday drained the market of liquidity, leaving FX markets rangebound.
EURUSD rose from 1.0884 to 1.0931 even though November PMI data was still in recession territory. German GDP and IFO data are due on Friday.
GBPUSD climbed from 1.2490 to 1.2573, supported by mostly better-than-expected UK PMI data ahead of GfK Consumer Confidence data tomorrow.
USDJPY firmed in a 148.89-149.60 range. Japan was closed for a holiday and prices tracked broad US dollar moves.
AUDUSD traded in a 0.6538-0.6575 band with prices receiving lingering support from yesterday's hawkish comments by RBA Governor Bullock.
The Canadian and US economic calendars are empty.
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