Canadian gains stall on oil drop

Key Movers

The USD has made slight gains in overnight trading against most majors after falling off for the three previous sessions.  Equities and oil are down early as oil dropped under the $90 a barrel level on demand concerns. US election results are still being tabulated as well with control of both the House and Senate up for grabs. As the votes get counted today, markets will be shifting focus to tomorrow’s CPI Inflation data. This announcement could have impact on the outlook for the next Federal Reserve announcement in December. Currently the bias is leaning to a 50 point hike at 57% while 43% of investors are expecting a rise of 75%.  An inflation print that is substantially different than the 8% we saw last time could swing that bias and thus have impacts on the currency markets.

In the APAC sessions, we saw the announcement from China of the highest one day COVID-19 cases in the last 6 months.  This has led to doubts that the “Covid zero” policies will be abandoned in the short term and has cut outlook on oil demand. As a result. WTI has fallen under the psychological $90 a barrel mark.

European markets and currencies were down slightly as markets globally await the full results of US mid-terms. Concerns were leaking into markets that should the Republicans take both houses, any stimulus to curtail a possible recession in 2023 would have to come in the form of Fed rate cuts as any stimulus spending may get hung up in a battle between the White House and Capitol Hill.