Canadian Dollar Update, December 1, 2022 – Canadian dollar rallies after Powell speech

USD/CAD Open: 1.3427-31, Overnight Range: 1.3397-1.3435, Previous Close: 1.3418

WTI Oil open at $81.00 and gold open at $1,776.69. US markets are lower on 1st of December.

As For 1st December, USD resistance is at 1.3465. Support is at 1.3385.

Highlight

• Powell suggests rate hike pace will slow in December

• Positive risk sentiment lifts equities, commodities, and sinks Treasury yields

• US dollar falls across the board. JPY outperforms

The Canadian dollar took a turn for the better yesterday following Fed Chair Jerome Powells speech to the Brookings Institution.

USDCAD fell from a pre-Powell speech level of 1.3564 to 1.3428 as positive risk sentiment surged. Wall Street stocks roared higher, and the S&P 500 index closed with a 3.09% gain. The US 10-year Treasury yield dropped from 3.798% to 3.64%, then continued lower overnight, falling to 3.591% in early NY trading.

Mr. Powells speech was deemed to be dovish despite not really changing his tune from his post-FOMC meeting press conference. On November second Mr. Powell suggested —“it will become appropriate to slow the pace of increases as we approach the level of interest rates that will be sufficiently restrictive to bring inflation down to our 2 percent goal.”

On 30th November he merely tweaked the above sentence and said, The time for moderating the pace of rate increases may come as soon as the December meeting.

That was all markets wanted to hear. Traders blissfully ignored the parts of Powells speech that said US rates would continue to rise and stay in restrictive territory until inflation fell to 2.0%.

Risk sentiment got an added lift from reports that China eased Covid restrictions further.

Stocks in Asia rallied and closed with strong gains. European equity markets are higher and S&P 500 futures are unchanged.

West Texas Intermediate (WTI) oil surged on broad US dollar weakness and a steep drop in US crude stocks. The Energy Information Administration reported crude inventories fell 12.58 million barrels last week a much steeper fall than the 2.75 m/b decline expected. WTI rallied from $79.66/barrel to 81.79/b overnight.

EURUSD rallied from 1.0291 yesterday to 1.0463 overnight while ignoring weaker than expected German October Retail Sales and soft Eurozone manufacturing PMI reports.

GBPUSD soared from 1.1920 yesterday to 1.2156 in NY with slightly better than expected Markit Manufacturing PMI providing a bit of support.

USDJPY traded in a 135.84- 139.84 in the past 24 hours with prices pressured by falling Treasury yields.

AUDUSD climbed from 0.6676 Wednesday to 0.6839 in Europe underpinned by improving risk sentiment from hopes China eases Covid restrictions.

Yesterday's data includes weekly jobless claims (forecast 235,000), Core Personal consumption Expenditures Price index and ISM Manufacturing PMI.