Moneyway Analysts report:
Oil continues to trade over $57 USD a barrel, Canadian dollar a little better.
Oil is close to levels not seen since mid-2015, traders are nervous that oil supplies could be disrupted as tensions between Saudi Arabia and Iran move to the forefront of the political stage. Saudi Arabia has gone as far as to warn its citizens to leave Lebanon as this is where this contentious issue could be acted out.
The Canadian dollar is a little better, markets are still unsure of what the Bank of Canada’s intentions are. Traders are pricing in a small chance that the BoC will hike in January, expect the CAD to range between 1.26570-1.2730 in the near term.
Rosalind Mathieson of Bloomberg Reports on TPP:
Pacific nations are yet to agree on how to salvage a blockbuster trade pact after days of talks in Vietnam, with Australia confident of an outcome but Canada warning it wants a good deal over a fast one.
Trade ministers meeting on the sidelines of the Asia-Pacific Economic Cooperation summit are due to present their proposal on the future of the Trans-Pacific Partnership to leaders on Friday. At this stage, though, they still don’t have a deal.
The pact, which would have covered 40 percent of the global economy, was thrown into disarray when Donald Trump withdrew the U.S. in one of his first acts as president, leaving the remaining 11 countries scrambling to keep the deal alive. The discussions in Vietnam have centered around suspending some parts of the agreement in a bid to move forward without America’s involvement.
“We are hopeful of securing a deal inside the next 24-48 hours,” Australian Trade Minister Steve Ciobo said Thursday in an interview in Vietnam. “We’re not there yet — there’s still a bit of work to do but we’ve been making steady progress,” he said.
“Like any deal it’s not done until it’s done and there’s still work to be completed, but we are very close and with a final nudge over the next day I hope we will get there,” Ciobo added.
Malaysia has also said the countries are moving toward a deal. But that optimism contrasts with Canada, whose trade minister Francois-Philippe Champagne said in an interview Wednesday that speed shouldn’t take priority over getting a good agreement.
XE Reports on Currencies:
EUR-USD has been choppy, dipping under 1.1600 before rebounding to the 1.1640 area in the late London AM session. The dip came after ECB’s Coeure said earlier that there is nothing that would justify an end to ECB monetary stimulus, while the rebound reflected a broader drop in the dollar, which seemed to correlate a deepening risk-off theme in European stock markets. Uncertainty over the pending Republican tax reform bill, with different versions being debated in the House and the Senate, has been a factor. In the bigger view, EUR-USD’s price action remains consistent with the bearish trend that’s been in evolution since early September, when the pair capped out after a five-month rally period at 1.2092. Former support at 1.1618-20 marks resistance.
USD-JPY turned about 70 pips lower in returning to around the 113.30 mark, breaking free of a narrow orbit of the 114.0 level. EUR-JPY and other yen crosses saw a similar price action. News that the U.S. three-carrier strike group was conducting exercises off the Korean peninsular seemed to rattle some nerves in markets, prompting buying of the safe haven Japanese currency while pushing stocks — particularly markets in Japan and South Korea — off highs. Japan’s broad Topix index clocked a new 25-year high before falling back. U.S. equity index futures came under modest pressure after the main indices on Wall Street clocked fresh record highs yesterday. USD-JPY has support at 113.14-15, and resistance at 113.78-80.
The pound came under pressure once again, slipping to respective 2- and 3-day lows versus the dollar and euro, and into three-week terrain in the case against the yen. Sub-forecast RICS house price data, which showed that price declines have spread out of London to several other regions, provided bearish fodder, coming at a time of an evidently weak, and presently scandal ridden, government, which is exacerbating concerns about the Brexit process. Cable logged a low of 1.3082. A series of lows seen in October between 1.3027 and 1.3039 form a key support zone. Resistance is at 1.3168-70.
EUR-CHF has tipped under 1.1600 for the first time since last Wednesday. Heaviness in EUR-USD and other euro crosses has been weighting on EUR-CHF. The 33-month peak seen in late October at 1.1712 has slipped off the radar screen, though we continue to anticipate an eventual return to 1.2000, which is the former trading floor of the SNB.
USD-CAD has settled in the mid 1.27s after logging a two-week low on Tuesday at 1.2702. The pair’s two-month rally phase from sub-1.2100 levels looks to have stalled over the last week. BoC Governor Poloz in a speech this week reaffirmed guidance given last month by saying that “the economy is likely to require less monetary stimulus over time, we will be cautious in making future adjustments to our policy rate.” Not quite a fully committed tightening path, then, in the face of moderating growth momentum in the economy, continued benign price pressures, and ongoing uncertainty about NAFTA negotiations. We project the next BoC rate hike to be in March. We expect USD-CAD to trade with little directional bias for now.