Talking Points:

  • The Dollar sported key event risk in a record-breaking small business sentiment report, but its move proved lackluster
  • Oil was a top mover again Tuesday with production headlines leading the way - so why isn't USD/CAD posting a reversal?
  • A scheduled Trump conference, OPEC production meeting and run of economic data top schedules Wednesday

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The top scheduled event risk this past session once again fell short of the mark for major market movement this past session. Top listings on the economic docket included the US small business sentiment survey (NFIB) and Chinese inflation figures. Both measures offered up significant change in their course, but neither Dollar nor Yuan responded in kind. The headline reading surged to a 12-year high and the forecast component posted its biggest monthly jump since the series began. As the largest source of jobs in the US, this would seem a clear boon to the economy and Dollar, but markets didn't seem to judge it that way. Meanwhile, the accelerating producer inflation in China has revived the 'exported inflation' theme that had previously prompted global monetary policy course adjustments. This time however, USD/CNH couldn't capitalize on an already active market.

Where price action outstripped its scheduled fundamental offerings was with oil...again. The commodity dropped heavily for a second day to more definitively curb appetite for the long-term inverse head-and-shoulders pattern that fell apart at launch this past month. Interestingly enough, despite the drive and course change, USD/CAD has still defied its long standing correlation to the commodity. From a technical, fundamental and market condition perspective; this pair represents a best fit for what the markets have to offer. In fact, many of the Canadian Dollar crosses are appealing - such as GBP/CAD, AUD/CAD and NZD/CAD. However, the oil relationship remains a wildcard. Perhaps the purported OPEC and Non-OPEC production monitoring meeting scheduled today will motivate more from both oil and USD/CAD.

While it is worth keeping tabs on risk trends, Brexit and other key themes (USD/JPY, Yen crosses and EUR/GBP are some of the most fundamentally-appealing crosses in the market); powder should be kept dry until they are showing real conviction. Events like UK trade and the Brazilian rate decision are unlikely to tip the scales. In contrast, the proposed press conference announced by President-elect Trump last week can generate reaction from the market via the never the market currently finds most sensitive - the intersection between risk trends, monetary policy and trade relationships. With fiscal stimulus, trade policies and other key agenda points still up in the air; the market will be tuned in. We discuss what's ahead in today's Trading Video.

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