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CAD

Markets Reset to Pre-Inflation Release Levels 

Yesterday’s inflation data failed to make a persuasive case for imminent rate cuts. Growth in both the headline and core consumer price measures declined more slowly than economists had hoped, and services ex-shelter inflation remained sticky, suggesting that the disinflation process could prove unexpectedly turbulent. But markets are back to betting on rapid monetary easing. After a brief post-release bump, ten-year yields are back below the 4 percent threshold, Fed fund futures are discounting five or more cuts by the end of 2024, and odds on a 25-basis point move at the central bank’s March meeting are holding near 70...

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Trading Ranges Narrow Ahead of US Inflation Print

Currency markets remain fundamentally directionless this morning as traders batten the hatches ahead of tomorrow’s US inflation report. The DXY dollar index is modestly softer, dragged lower by an incremental decline in Treasury yields, and equity futures are setting up for another day of sideways movement. Oil prices are lending the Canadian dollar some support, with both major benchmarks rising as tensions in the Middle East ratchet higher. Houthi rebels based in Yemen fired eighteen drones, two cruise missiles and a ballistic missile at shipping in the Red Sea during European trading hours, adding to the likelihood of an assault...

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Caution Prevails, Keeping Currencies Rangebound

The dollar is performing in a mixed manner relative to its major rivals this morning as risk appetite fades amid a lack of definitive trading narratives. Investors are taking dovish comments from the Bank of Portugal’s Governor with a huge helping of salt. The euro-dollar exchange rate remained effectively unchanged after Mario Centeno told an interviewer “I don’t think we have to wait until May” to make a decision on cutting rates, “I don’t see any sign that second-round effects on wages have materialised or will materialise or that wages will put additional pressure on prices”. Odds on the European...

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Fed Pivot Hopes Stabilize, Leaving Currencies Unmoved

Equity markets are down ahead of the North American open after midair blowout on an Alaska Airlines flight hammered Boeing shares and lent new meaning to the term “window seat” – but risk appetite in other asset classes has been left largely unaffected. Fixed income and currency markets are relatively stable, with the dollar retreating only modestly from its early-year highs. Friday’s session was full of sound and fury, signifying nothing. Treasury yields and the dollar rallied when data was released showing US job creation and wage gains accelerating in December, but the move faded as traders parsed the details,...

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Solid Jobs Creation Pushes Monetary Easing Expectations Back

The US economy generated stronger wage growth and more jobs than expected in December, adding momentum to an ongoing reversal in Federal Reserve rate cut bets across the financial markets. According to data released by the Bureau of Labor Statistics this morning, 216,000 jobs were added, and the unemployment rate held steady at 3.7 percent, remaining near historic lows. Average hourly earnings rose 4.1 percent year-over-year, solidly topping expectations for a 3.9 percent increase. Ahead of the release, consensus estimates had pointed to a 170,000-job gain, and the unemployment rate was seen moving slightly higher. Diffusion indices – which measure...

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