Loonie soars on Canadian CPI spike, outperforms

GBP, JPY, AUD, EMFX Rally, USD Mostly Lower

Summary: The Canadian Loonie soared against the US Dollar, outperforming its G10 peers after Canada’s Annual Consumer Price Index climbed to its highest level since 2003. In the UK, consumer inflation was higher than forecast, boosting the British Pound. The USD/CAD pair slumped 0.53% to 1.2627 in late New York (1.2694). Sterling rallied 0.24% to 1.3845 at the New York close against 1.3813 yesterday. The Dollar Index (USD/DXY) which measures the value of the Greenback against a basket of 6 major currencies eased 0.15% to 92.50 from 92.65. Commodity currencies advanced against the Greenback. The Australian Dollar rallied to 0.7333 from 0.7320 while the Kiwi (NZD/USD) was up 0.17%to 0.7110 (0.7098). In subdued trade, the Euro climbed to 1.1817 from 1.1802 yesterday. USD/JPY slipped to 109.38 from 109.65. The Greenback was mostly softer against the Asian and Emerging Market Currencies. USD/CNH (US Dollar- Offshore Chinese Yuan) dipped 0.12% to 6.4275 (6.4355). Against the Singapore Dollar, the Greenback eased to close at 1.3405 from 1.3438 in Asia yesterday. Global bond yields settled a touch higher. The US 10-year Treasury bond rate was last at 1.30% (1.28%). Germany’s 10-year Bund yield settled at -0.31% from -0.34% yesterday. The UK 10-year Gilt yield climbed 4 basis points to 0.78% from 0.74%. Canadian 10-year Bond rates were up 5 basis points to 1.22% (1.17%).

Data released yesterday saw New Zealand’s Current Account Deficit in Q2 ease to -NZD 1.4 billion from -NZD 2.895 billion in Q1 and beating estimates at -NZD 1.74 billion. Japan’s July Machinery Orders dipped to 0.9% against forecasts for a 2.4% increase. Australia’s Westpac Consumer Confidence Index in September was up at 2.0% against a previous -4.4%. China’s August Retail Sales (y/y) dipped to 8.9% from 10.3% in July and estimates at 9%. Chinese August Industrial Production slipped to 5.3% from 6.4%, lower than expectations at 5.8%. UK August CPI rose on an annual basis to 3.2%, beating median forecasts at 2.9%. UK Core Annual Core CPI was up at 3.1%, against estimates at 2.9% and a previous 1.8%. UK Annual Retail Price Index rose to 4.8% from 3.8%, and higher than forecasts at 4.7%. Eurozone July Industrial Production climbed to 1.5% against median expectations at 0.6%. Canada’s August Annual CPI rose to 4.1% from 3.7% in July, and higher than expectations at 3.9%. Canada’s August Annual Core CPI printed at 3.5% from 3.3% and forecasts at 3.7%. US August Industrial Production matched forecasts at 0.4% while Capacity Utilisation eased to 75.3% from 76.4%.

• AUD/USD – The Aussie rallied against the overall weaker US Dollar to finish at 0.7333 from its 0.7320 open in Asia yesterday. Overnight high traded was 0.7339 while the overnight low recorded was at 0.7301.
• USD/CAD – The US Dollar slid 0.53% against the Canadian Dollar to 1.2627 from 1.2694 in choppy trade yesterday. The spike in Canada’s Annual August CPI to 4.1% from the previous rise of 3.7% in July lifted the Loonie above its southern counterpart. Overnight low traded was at 1.2624 while the overnight peak was at 1.2710.
• GBP/USD – Sterling rose 0.24% to 1.3845 at the New York close from 1.3813 in Asia yesterday. The higher UK inflation and Retail Price data supported the British currency. Overnight high traded was 1.3855 while the low recorded was 1.3792.
• USD/JPY – finished lower in lively trade to 109.38 from 109.65 yesterday. Overnight, the USD/JPY pair peaked at 109.74. The low recorded for USD/JPY was at 109.11.

On the Lookout: Today sees another economic data dump. New Zealand’s Q2 GDP released earlier saw NZ Q2 GDP rise to 2.8%, beating estimates at 1.3% and Q1’s 1.6%. The Kiwi spiked to 0.7130 (0.7110 open) immediately after the release where it currently sits.

Up next is Japan’s August Trade Balance (f/c -JPY 47.7 billion from July’s +JPY 441 billion – ACY Finlogix). Japanese Imports are expected to climb to 40% from 28.5% while Exports are seen to fall 34% from 37%. Australia follows next with its August Employment Change (f/c between -70,000 to -90,000 from previous +2,200 – ACY Finlogix). This data will be closely scrutinised to see how the latest Delta surge has impacted Aussie Jobs. Australia’s Unemployment Rate is forecast to rise to 4.9% from 4.6%. The Participation Rate is also expected to drop to 65.7% from 66.0%.

European data kick off with Switzerland’s SECO (Swiss State Secretariat for Economic Affairs) Economic Forecasts. The Eurozone follows with its Trade Balance for July (no f/c, previous was +EUR 18.1 billion). Canada starts off North America with its August Housing Starts (f/c 268,000 from 272,200), Canadian August Wholesale Sales (f/c -2% from previous -0.8%). US Weekly Jobless Claims is next (f/c 325,000 from 310,000), US August Headline Retail Sales (f/c -0.7% from -1.1%) and August Core Retail Sales (f/c -0.1% from -0.4%). US Philly Fed Manufacturing Index rounds up today’s reports (f/c 18.9 from 19.4).

Trading Perspective: Today’s a big data day with Australian August Jobs and US Retail Sales heading the list. The US Dollar lies in the balance. Already this morning, New Zealand’s Kiwi jumped 20 points following the release of better-than-expected NZ Q2 GDP report. The AUD/NZD cross slumped to 1.0275 lows from 1.0315 opening this morning before settling at 1.0297 currently. The Aussie Battler awaits today’s Australian Employment report (11.30 am Sydney). US Retail Sales are forecast to improve in August in both headline and core data. Any disappointments could add more pressure to the Greenback heading into next week’s crucial FOMC meeting.

• AUD/USD – Expect the Aussie to consolidate in a likely trade today between 0.7310-0.7370. A weak Employment report (ie a loss of more than 90,000 jobs) will see a break of the supports at 0.7300. The next support level lies at 0.7270 followed by 0.7240. If Australian Job losses are lower than 50,000 the Aussie will test higher. Immediate resistance can be found at 0.7365 followed by 0.7390.
• GBP/USD – Sterling rallied against the Greenback to finish at 1.3845 in New York from its 1.3813 open yesterday. The British Pound traded to an overnight high at 1.3855 following the release of higher-than-expected UK inflation numbers. Immediate resistance today lies at 1.3855 (overnight high) followed by 1.3875 and 1.3905. Overnight low traded for Sterling was at 1.3792. Immediate support can be found at 1.3790. The next support lies at 1.3760. Look for consolidation in a likely range today between 1.3780-1.37880. Prefer to sell rallies.
• USD/CAD – The US Dollar slid against the Canadian Loonie to 1.2627 from 1.2694 yesterday. Canada’s CPI in August soared to an annual 3.2% from July’s 2.0%, and higher than estimates at 2.9%. Core CPI was also higher than expected. The overnight low traded for USD/CAD was at 1.2624. Immediate support lies at 1.2600 followed by 1.2580 (strong). Immediate resistance can be found at 1.2660 and 1.2690. Look to buy USD dips in a likely range today between 1.2620-1.2690.
• USD/JPY – trading is picking up in this currency pair. Overnight the USD/JPY pair traded a range between 109.11 and 109.74, closing at 109.38 (109.65 yesterday). For today immediate support lies at 109.20 followed by 109.00. Japan releases its August Trade Balance today. Immediate resistance can be found at 109.60 followed by 109.90 and 110.10. Looking to buy dips in a likely range today of 109.10-109.80.

(Source: Finlogix.com)