​EBC Markets Briefing | Loonie up on hot inflation; metal markets collapse

The dollar weakened in early Asian trade on Wednesday, further away from the 6-month high against the Canadian dollar. PM Carney has confirmed sectoral tariff deal with the US.

Canada's annual inflation rate increased more than expected to 2.4% in September, mainly led by a smaller decline in gasoline prices on a yearly basis and a rise in food prices, data showed on Tuesday.

However, economists said the rise in headline inflation masked signs of easing price pressures beneath the surface as the overshoot was driven by a few volatile categories.

The report came before the BOC meets for its next monetary policy decision later this month. Money markets put a more than 86% probability on a 25-bp cut, the second in a row.

Businesses' sales outlook remained subdued and recessionary concerns persisted. Most reported weak demand and abundant capacity, which combined led persistently soft hiring and investment plans.

Moody's charted the path of the two economies in North America and discovered a growing gap that it predicts will only get wider. Weak labour productivity in Canada has been part of the problem.

Loonie again got back to the resistance at 1.4000 per dollar. The base scenario is a retreat will take place from here and lead to 1.4024 per dollar.

Asset recap

As of market close on 20 October, among EBC products, RTX and 3M led gains. Wall Street volatility is elevated during Q3 earnings session.

RTX Corp beat Q3 earnings and revenue estimates, with double-digit organic growth across all segments, and raised its full-year outlook; 3M Co also surprises to the upside, highlighting turnaround progress.

Metal prices took a nosedive. Although Russia and Ukraine failed to agree on ceasefire terms, the crowded long positions inevitably triggered a sharp reversal.

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