Canadian Dollar Drops with Crude Oil as IAEA Mulls Iran Sanctions

2016-01-15 08:28:00 Ilya Spivak, Head Strategist, APAC

Talking Points:

Aussie Drops, Yen Gains as China Helps Amplify Risk Aversion Overnight
Canadian Dollar Sinks with Crude Oil Before UN Decision on Iran Sanctions
US Dollar May Rise if Data Outcomes, Fed-Speak Boost Rate Hike Outlook

The sentiment-linked Australian and New Zealand Dollars plunged alongside Asian stock markets while the Euro and Yen outperformed amid an unwinding of carry trades positions as risk aversion struck markets overnight. Chinese news-flow appeared to amplify the selloff. Beijing weakened the Yuan by the most in a week at the daily fixing, a now-familiar source of market jitters, and posted weaker-than-expected lending figures.

The Canadian Dollar caught up to selling pressure facing its commodity-bloc counterparts late into the session as WTI crude oil prices dropped to the lowest level in close to 13 years. Newswires linked the plunge to worries about the impact of on-coming supply before the lifting of export sanctions on Iran, which could come as soon as Monday if the International Atomic Energy Agency (IAEA) approves the move today.

Looking ahead, US retail sales and consumer confidence data as well as commentary from New York Fed President Bill Dudley are in focus. Receipts are seen falling 0.2, but the reading may reflect sinking oil prices. The core sales figure that excludes fuel and autos is forecast to yield a more respectable 0.4 percent gain, marking only slight deceleration from the prior month’s 0.5 percent gain. The University of Michigan consumer sentiment gauge is seen rising to a six-month high.

US economic news flow has markedly improved relative to consensus forecasts over recent weeks, hinting that analysts may be underestimating the economy’s vigor and opening the door for upside surprises. If such outcomes are coupled with comments suggesting the Fed intends to look past market turmoil to focus on fundamentals from Mr. Dudley, rate hike bets may firm. This is likely to boost the US Dollar and amplify risk aversion.

Gauge Trends and Spot Reversals in Leading Currencies with DailyFX SSI

Asia Session

GMT	CCY	EVENT	ACT	EXP	PREV
21:45	NZD	Food Prices (MoM) (DEC)	-0.8%	-	-0.2%
00:30	AUD	Home Loans (MoM) (NOV)	1.8%	-0.5%	-0.3%
00:30	AUD	Investment Lending (NOV)	0.7%	-	-5.8%
00:30	AUD	Owner-Occupier Loan Value (MoM) (NOV)	2.4%	-	0.6%
02:00	CNH	Money Supply M2 (YoY) (DEC)	13.3%	13.6%	13.7%
02:01	CNH	Money Supply M0 (YoY) (DEC)	4.9%	3.5%	3.2%
02:01	CNH	Money Supply M1 (YoY) (DEC)	15.2%	15.5%	15.7%
02:01	CNH	New Yuan Loans (CNY) (DEC)	597.8B	700.0B	708.9B
02:01	CNH	Aggregate Financing (CNY) (DEC)	1820.0B	1150.0B	1018.1B

European Session

GMT	CCY	EVENT	EXP	PREV	IMPACT
09:30	GBP	Construction Output SA (MoM) (NOV)	0.5%	0.2%	Low
09:30	GBP	Construction Output SA (YoY) (NOV)	-0.1%	1.0%	Low
09:30	GBP	BOE Credit Conditions, Bank Liabilities Surveys	-	-	Low
10:00	EUR	Eurozone Trade Balance SA (NOV)	21.0B	19.9B	Low
10:00	EUR	Eurozone Trade Balance NSA (NOV)	23.0B	24.1B	Low