The possibility of a first key rate increase by the Fed is leading investors to adopt a cautious approach. North American stock markets turned in their worst session in several weeks yesterday, while the US Dollar Index is approaching its peak seen in March. Although this is bad news for the bottom lines of U.S. firms doing business overseas, the robust greenback is reducing the inflation outlook and could help support a more dovish tone from the Fed despite a first rate hike in December.
Data shows that Chinese inflation in October failed to keep pace with analysts' projections, increasing the risk of deflation and pointing to the possibility of a very aggressive monetary policy by the People's Bank of China. Asian and European stock markets were down overnight while crude oil prices are stable at around $45 a barrel.
The economic calendar is relatively sparse today, although we will be keeping a close eye on comments by Chicago Fed President Charles Evans at 2:30 p.m. The Canadian dollar is up slightly against the USD and the euro.
Have a great day!
Emmanuel Tessier-Fleury
Range of the day: 1.3205 - 1.3315