CAD to underperform alongside USD – MUFG

FXStreet Insights Team FXStreet

USD/CAD has declined to close to fair value. Economists at MUFG Bank analyze the pair’s outlook.

Fed-BoC alignment set to continue in 2024

2002-2005 & 2010-2013 were periods of tighter BoC policy relative to the Fed – this is unlikely to emerge in 2024. Market expectations are very tightly aligned for the Fed and the BoC to move in tandem in 2024 which seems likely to us.

Increased equity market volatility in 2024 as US growth slows will have implications for CAD given CAD/S&P correlation. If equity market volatility picks up next year that could see CAD suffer more than other G10 currencies especially if source of volatility is US-related.

CAD undervaluation has been eliminated over recent months. USD/CAD has reverted toward fair value limiting potential scope for outperformance going forward.

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FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD tumbles amid soaring US yields, ahead of jobs data

The Aussie Dollar stumbles over 1% against the US Dollar on Wednesday as US Treasury yields soar, with the US 5- and 10-year T-note yields surpassing the 5% threshold amid investor confidence in further Federal Reserve tightening. The AUD/USD trades at 0.7039 after peaking at 0.7118.

USD/JPY stands firm near mid-157.00s, close to two-week high

USD/JPY hovers around mid-157.00s in the Asian session on Wednesday, near two-week highs touched last Friday as the BoJ's dovish rate hike continues to undermine the Japanese Yen. Meanwhile, the US Dollar remains firm amid the Fed's hawkish stance, adding support to the pair, though JPY intervention fears cap further gains. Markets pay little heed to the completion of the round of US-Iran indirect talks ahead of Trump-Xi meeting.

Gold falls to weekly troughs below $4,300

Gold rapidly leaves behind two daily upticks in a row and comes under heightened downside pressure midweek. Indeed, the precious metal breaches below the $4,300 mark per troy ounce to reach weekly lows amid the marked recovery in the US Dollar and the generalised upbeat tone in the US money market.

Australia unemployment rate expected to remain unchanged at 4.5% in August

Australia will release the August monthly employment report on Thursday at 01:30 GMT. Ahead of the announcement, analysts expect the country to have added 20K new jobs in the month, while the Unemployment Rate is expected to remain steady at 4.5%. The Australian Bureau of Statistics (ABS) report is also expected to show that the Participation Rate stood at 66.9%, unchanged from the previous month.

The 10 November cliff: How markets should trade the Trump Xi truce

Markets tend to treat summits as events. They are better understood as deadlines. The meeting between Donald Trump and Xi Jinping at the White House, which opens on Thursday September 24thm and runs through Friday the 25th, will produce warm words, contracts announcements, and a great deal of ceremony. What it may not produce is the one thing traders actually need, which is clarity about 10 November.

BoJ Recap: Not as hawkish as expected

The Bank of Japan (BoJ) raised its short-term interest-rate target to 1.25% from 1.00% in a 7-2 vote, marking another step in the normalisation of monetary policy and widely matching what everyone has been expecting for weeks.