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Crude Jumps on Russia/OPEC Rumours, USDCAD Steady

Published October 11, 2016
  • USDCAD is hovering on either side of its 200 DMA, at 1.3200 this morning after trading into the mid 1.3100's during Monday's sparse holiday session
  • A statement by the Russian president that the country would be keen to participate in a global production agreement sent crude prices to a one-year high yesterday with WTI reaching $51.60
  • Details remain difficult to come by and of course the effectiveness of any agreement remains a point of skepticism in the market
  • The loudest suggestion is that a cut from Saudi Arabia is likely to be offset by returning Libyan and Nigerian production as well as ambitions of countries such as Iraq and Iran to increase their output next year 
  • If cuts did prove effective at curbing OPEC supply, the market still has to contend with US shale which can come back online rather quickly once prices are hedged out a year above $50 a barrel
  • USDCAD dropped on the news yesterday but those CAD gains proved fleeting; the market still seems to want to go higher with the US dollar gaining broadly this morning  
  • The USD Index is up another 0.4% this morning against its G10 peers, its highest levels since July
  • US interest rates continue to move in favour of the greenback with the 10-year yield at its highest since May and above its 200 DMA for the first time since November 2015
  • Odds of a rate hike this December from the US Fed are above 60% (Chart 2), their best in months as the market gains confidence in a string of good data from the US
  • Retail Sales, Consumer Confidence and Industrial Output are the release highlights for the US this week 
  • Canada's sole top tier data was this morning's Housing Starts, better than expected for September at +220k

Charts: (1) USDCAD holds near 200 DMA. (2) Fed rate hike odds keep rising. (3) US 10yr Yield above its 200 DMA. (4) Economic Calendar.