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CAD
The greenback’s mid-week surge saw USDCAD finally pierce the 1.40 level which had looked to be a major resistance for the pair. This meant that the loonie was briefly left trading at lows last seen in early 2020 versus the greenback, before a retracement higher this morning. That said, considering the light domestic data calendar and our views on the dollar, we would not be at all surprised to see renewed USDCAD upside today. We continue to think that levels north of 1.40 would better reflect the pair’s fundamentals.
USD
The dollar made further gains on Wednesday, helped by October’s CPI report. While headline figures marginally undershot expectations on an unrounded basis, the details of the report were more robust. Granted, the initial selloff in FOMC policy expectations proved sticky, with OIS implied odds now projecting a 67% chance of a December rate cut. But the move across FX markets was better reflective of the details from yesterday’s CPI data, seeing a nudge higher for Treasury yields, and year-to-date highs for the DXY index. Today the focus shifts to FOMC commentary, with a docket headlined by Fed Chair Powell at 20:00 GMT. If, as we expect, he continues to offer a non-committal view on rate cuts, this could open the door to further dollar strength.
EUR
While the dollar’s rally has been the main story for FX markets over recent days, one that has taken EURUSD down to levels last plumbed over a year ago, today it is domestic data that should be in focus for euro traders. Specifically, preliminary Q3 GDP readings and employment data should be front of mind. Markets expected to see the first of these indicate growth of 0.4% QoQ, and 0.9% YoY. This would be a surprisingly solid number when considering the negative sentiment around the bloc. As such, a print that matches expectations would likely help put a floor under the euro’s recent slide. Even so, given grim recent PMIs, we can see downside risks to today’s release. If realised another leg lower for EURUSD looks more likely than not, especially with Fed Chair Powell set to speak later this evening.
GBP
After sliding notably through Tuesday trading, yesterday’s moves for GBPUSD were more muted. Admittedly, this still meant 0.3% downside for the pair in the face of broad greenback strength. But this also left the pound to outperform on crosses, finishing as the best-performing G10 currency on Wednesday, USD excepted. Today, the focus will be on monetary policy, with BoE Governor Bailey speaking at 21:00 GMT not long after Chair Powell hits the airwaves. If, as we expect, he too proves circumspect on policy easing, this should help keep further GBPUSD downside contained.