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CAD

05 Sep 2023

AUD battered & bruised

• Stronger USD. Softer data out of China & higher US bond yields on the back of a lift in oil has supported the USD. The JPY, AUD, & NZD hit fresh 2023 lows.• AUD underperformance. The AUD has weakened. As expected the RBA kept rates on hold, though it retained its mild conditional tightening bias.• Relative expectations. We think a lot of positives are factored into the USD & negative AUD sentiment is high. AU Q2 GDP & US services ISM released today. The USD has strengthened over the past 24hrs. Softer than expected second tier China Caixin Services...

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05 Sep 2023

Lowered expectations

As a long-ago MadTV skit illustrated, lowered expectations can be the key to happiness – in dating, and in life. Something similar applies in the currency markets, where – to paraphrase the behavioural investing expert Michael Mauboussin – traders need to assess the level of expected performance embedded in exchange rates and then assess the likelihood of a revision in expectations. If expectations seem poorly aligned with future results, volatility is likely ahead. Our turnover-weighted measure of economic surprise indices, which represents the gap between consensus forecasts and official data across the major currencies relative to the United States, suggests...

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05 Sep 2023

Risk appetite fades on China slowdown fears

The US dollar is stronger against all its major counterparts this morning, building on August’s 1.7-percent gain as weak Chinese data weighs on global risk appetite. US equity futures are setting up for a modestly-weaker open and Treasury yields are up across the curve, helping keep the trade-weighted greenback near six-month highs. Global commodity prices are under pressure, the euro is softer, and both the onshore and offshore Chinese yuan pools are trading below 7.30 to the dollar after the private-sector Caixin services purchasing manager index dropped to 51.8 in August from 54.1 in July (the 50 level marks the...

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01 Sep 2023

Markets leap higher on weakening payrolls growth

Goldilocks is enjoying her just-right porridge this morning after a US payrolls report pointed to a gradual easing in labour market conditions, supporting expectations for an imminent end to the Federal Reserve’s tightening cycle. North America The US economy added 187,000 new non-farm jobs last month, marking the third consecutive month of gains below 200,000, and helping bolster bets on an imminent end to the Federal Reserve’s tightening cycle. According to the Bureau of Labor Statistics, the unemployment rate jumped off historic lows to 3.8 percent in August, up from 3.5 percent in the previous month’s print (but we note that...

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01 Sep 2023

CAD

Canada’s economy showed clear signs of deceleration in the third quarter, reducing market-implied odds on further rate increases from the Bank of Canada. Although inflation measures remain sticky and above the central bank’s target range, excess demand is clearly ebbing, and labour market tightness is beginning to ease. Conditions will likely worsen in the months ahead as the early autumn surge in global borrowing costs inflicts pain on one of the world’s most deeply over-leveraged private sectors hard, and we expect rate differentials to tilt more firmly against Canada into early 2024, offsetting commodity price gains and a generalized dollar...

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