Login
CAD
Given the light data calendar elsewhere, the major focus for today should be Canadian CPI. Markets expect a 2.0% YoY headline reading, with both core-median and core-trim a little higher at 2.4%. As we have noted previously though, we see downside risks to this afternoon’s print. Inflation in Canada has undershot expectations with some regularity over the last year, while short-term inflation momentum is negative at present. Moreover, an undershoot today could be pivotal for the BoC. Rate cut expectations see the outcome of the December meeting finely balanced between a 25bp and 50bp rate cut, and this is the only CPI print due ahead of that decision. If the data does undershoot, we would expect to see traders accelerating rate-cut bets. This dynamic is likely to see USDCAD headed back toward the 1.41 level if realized, which proved a notable resistance yesterday before the pair retraced lower in line with the broader moves for the dollar.
USD
The dollar slipped back through the second half of Monday trading, despite a light data calendar and minimal commentary of significance from Fed speakers. That said, we do think headlines suggesting that Warsh has emerged as favourite for Treasury Secretary were notable – we suspect that markets would prefer either Bessent or Lutnick, the two other leading candidates. Even so, the dollar’s move lower was consistent with our view that the post-election rally had likely run out of steam. With no major catalysts on the horizon before November’s jobs report, rangebound dollar trading now looks the most likely scenario over the coming few weeks.
EUR
While today’s final CPI readings should offer little impetus for the single currency, tomorrow’s negotiated wage data, combined with PMIs later in the week, should still provide plenty to keep euro traders on their toes. We think both releases hold upside risks for eurozone rate expectations. The former is likely to show that wage growth accelerated in Q3, while the latter should see some support from seasonal adjustments, which we expect to turn more supportive from this month onwards. All told then, this should help markets to price out the remaining residual risk of a 50bp cut over the coming meetings, a dynamic that will offer upside support for the euro this week if realised.
GBP
A blank data calendar should keep sterling traders squarely focused on BoE speakers today. That is perhaps fortunate given that Governor Bailey, accompanied by Lombardelli, Mann, and Taylor are all due to appear in front of the Treasury select committee in what is usually a marathon testimony session. While any earth-shattering revelations look unlikely, further elaboration on the impact of the budget is probable, which should sound hawkish at the margin. If we are right, this leaves domestic events posing modest upside risks for sterling today ahead of tomorrow’s CPI reading.