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CAD
The loonie underperformed the broad dollar rout on Wednesday, gaining just 0.2% versus the greenback. Indeed, despite only modest losses on the day, USDCAD remains above the 1.40 level, a development we think is notable. While the pair has been slow to move higher post-election, it has also largely failed to participate in any retracements. This dynamic gives us confidence that a slow grind higher for the pair is most likely as markets continue to price in Trump-related risks. More immediately though, US holidays and a blank data calendar are likely to see the pair treading water today, with tomorrow’s GDP figures the next notable release in scope for loonie traders.
USD
The DXY index slipped on Wednesday, falling 0.8%. While there was no obvious data driver behind the move, a fading haven bid on developments in the Middle East, combined with month-end flows that should be dollar-negative, look like the most probable culprits. On this point, while October PCE readings met expectations yesterday, we would note this means that 2024 core PCE is likely to come in at the top end of the FOMC’s September projections. This adds further support for a pause in December, if Fed voters are so inclined, leaving a path for the dollar to retrace higher into year-end. For now, though, Thanksgiving is likely to mean limited liquidity and thin trading, and a respite from the volley of headlines emanating from the Trump transition team which have been key for dictating dollar price action over recent weeks. Indeed, it should be a quiet end to the week too, with many US-based traders likely to be making the most of an extended holiday.
EUR
With the US out for the holidays, Europe should be the focus for traders heading into the end of the week. On the data front, that means November CPI readings, the first of which are set to be released today ahead of tomorrow’s aggregate eurozone print. That said, we will also be keeping a very close eye on developments in France which have been generating headlines this morning. Specifically, comments from the French finance minister suggesting that “France risks losing control” without a budget have sparked a move lower for the euro through early trading, leaving EURUSD down around a quarter of a percent so far this morning. As noted previously, political risk remains a major downside risk for the single currency. We continue to see real risks that France heads back to the polls early next year, a dynamic that if combined with a dovish shift from the ECB and a more hawkish Fed, could help EURUSD back down to parity in the coming months if realised.
GBP
No news is seemingly good news for sterling at present. The pound outperformed the euro yesterday, in light of a blank data calendar, rising 0.9% against the dollar. Moreover, there are no releases due today, with no central bank commentary scheduled too. As such, we are biased to think that another day of sterling outperformance is likely, absent any surprises.