Canadian Dollar remains generally firm today but it's overwhelmed by Aussie on commodity prices. Meanwhile, Euro trades mildly lower as results of the Catalonia regional election provide no resolution to the political crisis. Dollar again attempts to recover today but it's trading in red against all others expect Yen for the week. The greenback will need some solid PCE inflation data if it's going to have a sustainable rally.
Separationist parties triumph in Catalonia elections
With most votes counted for Catalan parliament snap election, the three pro-independence parties, Together for Catalonia (JxCat), Republican Left of Catalonia (ERC) and Popular Unity (CUP) together won 70 seats out of 135, two above majority and should be able to form a coalition government. However, they altogether got 2 fewer seats than in the 2015 election. The election result suggests a still-divided Catalonia and has done little to resolve the existing political crisis. Euro is mildly pressured on the news.
Odds of January BoC hike surged after data
Canadian Dollar was boosted by strong inflation and retail sales data overnight. After the two surprised rate hikes this year, BoC has turned cautious and thus market expectation for another hike in near term receded. But the set of solid data revived such speculations. OSI data are now pricing in close to 60% chance of a January hike and over 75% within Q1. But for the moment, USD/CAD is holding above 1.2598 key near term support. There is no confirmation of a reversal yet and Dollar would likely out-perform the Loonie.
Aussie strong on commodity prices
While Canadian Dollar was strong, it is being over-whelmed by Aussie, who's trading as the strongest for the week. Traders seem to be banking on surge in commodity prices and its support to the Aussie. China steel futures extended gains for the second day today. The most active rebar futures rises over 2%. Iron ore price on the Dalian Commodity Exchange also rose 0.4%. Nonetheless, we're still skeptical on the sustainability of Aussie's rebound as RBA will likely hold interest rate unchanged next year, until they see upward pressure in wages.
On the data front
Germany will release Gfk consumer sentiment in European session. Swiss will release KOF economic barometer. UK will release current account balance and Q3 GDP final. Later in the data, Canadian Dollar will look into GDP for further strength. On the other hand, Dollar will look into personal income and spending, PCE, durable goods and new home sales.