CAD falls on weak economic data and oil

Key Movers

The US dollar index (DXY) has rebounded on the back of the rise in US bond yields following the deal to avoid a US government shutdown. The US manufacturing industry activity picked up faster than expected to reach its highest level this year amid employment expansion in the sector. The good news for inflation worriers is that manufacturing prices also fell by more than 5 points during the month. Furthermore, the recent spike in crude oil prices appears to be easing. Ahead of the Organization of the Petroleum Exporting Countries (OPEC) meeting tomorrow, crude oil prices have fallen back to their lowest level in three weeks. Oil was seen dipping below $88 a barrel and dragging year-over-year gains down to just 5%. It will be another pivotal week for US labour data, culminating in the September employment report due out on Friday. Before that, attention will turn to the August job openings set to be released later today, for clues about the ongoing tightness of the jobs market.

In European news, both the pound and euro remain on the defensive, with peak rate expectations having come down sharply in the last few weeks. Market participants think the European Central Bank (ECB) is done hiking rates. The market is still anticipating 3 basis points (bps) of tightening in early 2024 and the Bank of England (BoE) is almost there, with 17 bps seen over the same period.

The Australian dollar continues to weaken, hitting its lowest level of the year after the Reserve Bank of Australia left its key policy rate unchanged at 4.10% overnight.

The rebound in the DXY has boosted USD/SGD, currently trading at $1.3730, the USD/SGD pair is near its highest level since last November. On other crosses, the EUR weakness has flowed through to EUR/SGD which now sits around 1.4385, near a 6-month low. Despite market volatility the SGD/JPY pair, trading at 109.14, rose to historic highs overnight.