– US election jitters underpinning US dollar.
– Treasury yields climb on Fed caution.
– US dollar mixed but rangebound to start the day.
USDCAD: open 1.3834, overnight range 1.3822-1.3838, close 1.3830, WTI $70.58, Gold, $2731.57
The Canadian dollar is rangebound but on the defensive after a lack of actionable data led to a quiet trading session overnight.
These factors fueled a surge in the U.S. 10-year Treasury yield, which soared to 4.22% overnight from 4.1% last Thursday. The rise in Treasury yields widened the CAD/US 10-year interest rate spread to 97.3 bps, an increase of 10 bps over the past week, contributing to the weakness in the Canadian dollar.
WTI oil prices rebounded from an overnight low of 69.36 to 70.94. The risk of Israeli retaliation raises the possibility of significant political fallout, including a potential leadership change in Iran. This development overshadowed reports that Saudi Arabia may significantly boost oil production starting in January, as the kingdom grapples with financial pressures.
EURUSD fluctuated between 1.0814 and 1.0838, pressured by rising U.S. Treasury yields and the likelihood of more ECB rate cuts. Traders are also awaiting comments from ECB President Christine Lagarde and Chief Economist Philip Lane for further guidance.
GBPUSD moved lower, trading within a range of 1.2967 to 1.3016, as uncertainty surrounding the U.S. election and concerns about the UK budget, which could lead to higher taxes, weighed on sentiment. Additional pressure came from the Bank of England’s dovish stance on rates, in sharp contrast to the Fed’s gradual approach to rate cuts.
USDJPY strengthened, trading between 150.50 and 151.10, driven by higher U.S. 10-year Treasury yields and political uncertainty in Japan. Prime Minister Shigeru’s political standing may weaken following this week’s elections, which could delay the Bank of Japan’s plans to normalize monetary policy. After nearly a decade of below-zero interest rates, this has become a new normal for Japan.
AUDUSD moved within a tight range of 0.6651 to 0.6694, with competing factors at play. Lower potential rates from the Reserve Bank of Australia and stable Fed rates clashed with recent Chinese fiscal and monetary stimulus, leaving the market without a clear direction.
There are no top tier economic releases from the US or Canada today.
