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CAD
The loonie remains one of the more interesting currencies to keep an eye on at present, not least when considering recent political developments. As we have noted previously, we think that Trump tariffs pose a serious downside risk to the Canadian economy – one that markets continue to underprice. While yesterday saw markets begin to align with this view following comments from Donald Trump, it was a little surprising to see traders subsequently pare some USDCAD length given the strength of the statements. This should continue to be front of mind for traders today too, with little else of note on the docket. While we continue to think that USDCAD should be trading much higher than current levels, price momentum suggests that some downside for the pair is the more likely outcome, at least in the short run.
USD
News of a cease-fire between Israel and Hezbollah overnight has removed some upside dollar support, with a fading haven bid taking 0.2% out of the DXY index so far this morning. That said, the big movers so far today are JPY and NZD, up 0.75% and 0.9% against the greenback respectively. The former maintains its appreciation trend from yesterday as BoJ rate hike odds for December continue to firm. The latter, meanwhile, has benefitted from RBNZ Governor Orr’s comments in the early hours which sounded more hawkish than markets had anticipated, despite the central bank trimming rates by 50bps in their latest rate announcement. For the remainder of the day, a second reading for US Q3 CPI is likely to be centre of attention alongside October PCE readings. Neither should hold too much surprise for markets ahead on Thanksgiving tomorrow.
EUR
A very light calendar of events scheduled in Europe today combined with minimal US catalysts, should see EURUSD treading water for the time being, before eurozone CPI comes into scope for FX traders tomorrow. Indeed, we think this week’s inflation prints are likely key for the ECB ahead of the December policy meeting. A soft set of readings would see a further acceleration of easing bets, with tariff risks already causing some consternation and weighing on sentiment. If realised, we think a 50bps rate cut next month becomes a real possibility, one that opens the door to parity on EURUSD in the coming months, especially if the Fed also holds rates in December.
GBP
The UK has a grand total of zero scheduled data releases for today, with no central bank speeches to tune into either. With this in mind, sterling is likely to see some very light price action today, with the currency left to trade at the mercy of external developments. So far this has seen sterling nudge a little higher as the dollar gives up ground, albeit given the lack of events elsewhere too, we see little scope for any explosive moves, absent a surprise.