The Canadian dollar is unchanged on Monday, following sharp losses in the Friday session. In North American trade, USD/CAD is trading at 1.2789, up 0.01% on the day. Omicron sends the Canadian dollar tumbling There was a flurry of activity on Friday in the markets as headlines blared about the spread of the Omicron variant of Covid-19. There was panic in the markets, as oil, equities, and minor currencies headed south. The Canadian dollar took it on the chin, falling 1.12%, its sharpest decline since July. The markets have calmed down on Monday, but fears remain that the variant could cause a massive spike in Covid cases. How much of a threat is Omicron? That would depend on who you ask. There have been reports out of … [Read More...]

Asian markets slide on Covid variant jitters The emergence of a heavily mutated new strain of Covid-19 in South Africa, labeled B.1.1.529, has sent Asian investors scurrying for the exit door. The UK has paused flights from South Africa and five other neighbouring countries. We can expect more of the same elsewhere, the complacency seen with the emergence of delta in India being a lesson harshly learned. Two cases with the new variant have already been detected in Hong Kong today. There are also media reports this morning about tightening virus restrictions in parts of China. Equity markets are being heavily sold including US futures, with OTC markets being closed overnight for the Thanksgiving holiday. S&P 500 futures are 0.85% lower, with Nasdaq futures down 0.70% and … [Read More...]

Australian dollar woes continue The Australian dollar has extended its downswing, posting sharp losses on Friday. Currently, AUD/USD is trading at 0.7135, down 0.74% on the day. It is not looking pretty for the currency, which is having another week to forget. AUD/USD is down 1.34% this week and November has been ugly, with the currency losing 5.11% this month. The emergence of a variant of Covid-19 in South Africa is causing jitters in the financial markets. We’re seeing a risk-off, flight to safety by investors, with risk currencies like the Australian dollar taking a beating. An excellent reading from Australian Retail Sales for October has not been enough to stop the Aussie’s slide.  Retail Sales jumped 4.9% in October m/m, as … [Read More...]

The Japanese yen is little changed in Thursday trade. It has been a rough week for the yen, which broke above the 115 line. On Wednesday, USD/JPY climbed as high as 115.52, its highest level since January 2017. Japanese inflation ticks higher Japanese inflation has been edging higher, which is not an event we are used to reporting on these pages. Inflation is certainly much more subdued than what we’re seeing in the US and the UK, where inflation has become a hot issue and is affecting monetary policy. Still, rising fuel prices have become a major concern for consumers and businesses, and the government’s new economic package is expected to provide some relief. Many businesses have been hit hard by cost pressures, due to the weak … [Read More...]

Europe has turned red on Friday as a new lockdown in Austria and the prospect of similar action in Germany wiped out earlier gains and forced stock markets down close to 1%. The euro is also falling at the end of the week following the announcement that Austria will begin a 20-day full Covid-19 lockdown from Monday in response to surging case numbers which have far surpassed last year’s peak. While fatalities remain well below the peak, they are accelerating and the government is clearly keen to arrest it before the situation potentially becomes much worse. With Germany seeing a similar trend, the question now becomes whether the region’s largest economy will follow the same path. Its Health Minister, Jens Spahn, today suggested nothing can … [Read More...]

A simple tweet from a CNN reporter reminded us that the most powerful man in Washington, DC remains Senator Joe Manchin. Chief Congressional Correspondent Manu Raju tweeted, “Manchin just told me he has NOT decided on whether to vote to proceed to the Build Back Better bill. If he voted NO, it would stall the effort.” US stocks dropped on the possibility that Senator Manchin would derail Biden’s social spending agenda and over some hawkish comments on inflation from Fed’s Williams.  Wall Street only wants to focus on inflationary themes, the strength of the US consumer, possible shifts on pricing pressure views at the Fed, and whether Biden will get anything else passed before midterm elections.  Fed’s Williams said he doesn’t want … [Read More...]

Or will the long term channel hold? The euro has been grinding lower against the pound for more than a year now, with much of 2021 spent within a shallow descending channel. But with the two central banks likely to see some divergence in monetary policy over the next 12-18 months, could we finally see the pair break out of this long-standing trend? The BoE bottled the rate hike at its November meeting, opting instead to wait for the furlough data before making its decision. Not bad logic in itself but when coupled with the communication in the run-up to the meeting, it’s confusing, to say the least. While most central banks appear to be on the same page that the huge inflation overshoots are transitory, … [Read More...]

The Canadian dollar has started the new trading week in positive territory, extending the gains we saw on Friday. Currently, USD/CAD is trading at 1.2502, down 0.40% on the day. In the US, inflation is surging, and the Fed’s message that inflation is transitory is looking more out of sync with the inflation data. October inflation numbers were red hot, with headline CPI rising to 6.2% y/y and CPI climbing to 4.6%, as both reads were the fastest pace seen since the early 1990s. A key question is how long can the Fed continue to ignore the inflation data and not take action. The job numbers point to many unfilled openings as the demand for workers continues to outstrip supply. JOLT job openings remained high … [Read More...]

Oil retreats as OPEC pares back demand forecasts Oil prices are pushing lower once again on Friday, after falling just short of their October highs earlier this week. The OPEC monthly report alluded to some of the challenges on the demand side in the coming months, as high energy prices likely weigh, prompting the group to revise down their forecasts by 330,000 barrels per day. That number could rise if we do see further Covid waves which may at least partly explain why producers are so reluctant to increase monthly output targets, even if not doing so is raising prices and contributing to the demand drag. Still, it seems prices may have peaked for now and could consolidate around this region. Ordinarily, after such a strong rally since … [Read More...]

Stock markets are pretty flat on Thursday, with Europe broadly lacking any real direction all week and the US battling inflation risks that are weighing on sentiment. The US inflation data on Wednesday was a massive blow, there’s no doubt about it. Combined with the jobs report on Friday and the employment cost index the week before, it paints a picture of an economy running hot and with widespread price pressures. The Fed may ultimately prove to be correct in its judgment that pressures will ease naturally over time as they’re broadly driven by temporary factors. But how long can they afford to stand by and watch inflation dramatically overshoot their target? Are they really that confident in their assessment? The pressure is intensifying. The … [Read More...]

The Australian dollar is in negative territory in the Tuesday session. AUD/USD is currently trading at 0.7388, down 0.44% on the day. The RBA has been consistent in projecting a rate hike in 2024 and reiterated this stance on Friday, when it released its quarterly monetary policy statement. The bank acknowledged that inflation has moved higher but said that it would be patient with regard to a rate hike. The markets, however, do not share the RBA’s stance and are much more hawkish on a rate move, with projections of a rate hike in 2023 or even in late 2022 if economic conditions are suitable. On Monday, ANZ Bank cut its home loan rate, a sign that the major bank is gearing for an earlier than expected interest rate … [Read More...]

US stocks are drifting from record highs after producer pricing pressures moderate and treasuries rise on delayed Fed rate-hike expectations and uncertainty on how the board will look next year. Now that earning season is winding down, corporate America did OK given the wrath of pricing pressures.  Investors are not looking forward to the debt limit crisis that seems poised to go down to the wire in early December.  The S&P 500 index went on a relentless run and was ripe for a down day. Tesla shares fell sharply for a second day as investors grow nervous risk aversion could be settling in.  Elon Musk’s brother sold 88,500 shares of Tesla on Friday, ahead of Musk’s Twitter poll that proposed the selling 10% of his stock.  Tesla … [Read More...]