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– Day of Mourning in USA-markets closed
– FOMC minutes confirm gradual easing.
– US dollar inches higher in quiet overnight session.
USDCAD: open 1.4386, overnight range 1.4385-1.4405, close 1.4376, WTI $73.40, Gold, $2667.48
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The Canadian dollar is drifting inside yesterday’s range, with trading activity reduced because of today’s US market closure. President Biden declared today a National Day of Mourning for Jimmy Carter, the 39th President of the USA, who died on December 29th at the age of 100.
The Globe and Mail reports that the Canadian government’s response to the Trump tariff threat is to respond in kind, but selectively. They are thinking of putting tariffs on orange juice and toilets imported from America.
The FOMC minutes didn’t tell markets anything they didn’t already know. The minutes said that “if the data came in about as expected, with inflation continuing to move down sustainably to 2 percent and the economy remaining near maximum employment, it would be appropriate to continue to move gradually toward a more neutral stance of policy over time.” The Trump effect was evident, as the statement noted a high degree of uncertainty about the impact of future policies on the economy.
EURUSD traded in a 1.0284-1.0324 range as it continues to suffer from diverging monetary policy expectations between the European Central Bank (ECB) and the Federal Reserve. Stronger-than-expected German industrial production data, which rose to 1.5% in November from 0.4% in October, provided some relief for EURUSD, although the short-term outlook is bearish.
GBPUSD traded negatively in a 1.2239-1.2367 range. Surging UK Gilt yields are putting government finances under scrutiny and could lead to higher taxes. Broad US dollar strength, the threat of US tariffs, and the prospect of a slower pace of Fed rate cuts are weighing on the currency.
USDJPY traded quietly in a 157.66-158.40 range. The US 10-year Treasury yield, which sits at 4.65%, is limiting losses, but today’s Japanese wage data supports a BoJ rate hike. Labour Cash Earnings rose to 3.0% in November from 2.2% in October. In addition, the recent verbal intervention by various officials has added another layer of resistance in the 158.60 area.
AUDUSD dropped to 0.6175 from 0.6218 due to ongoing fears of a global trade war and economic challenges in China. Expectations of an interest rate cut by the Reserve Bank of Australia (RBA) on February 18 add to the bearish sentiment.
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