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Market participants were still in no mood to take on riskier holdings as stocks chalked up another losing day while commodity currencies were also down.

On the flip side, the safe-haven U.S. dollar rushed to take advantage of these risk-off flows while the franc and yen trailed close behind.

  • U.S. building permits dipped from 1.27M to 1.26M in October
  • U.S. housing starts up from 1.21M to 1.21M in October
  • BOC official Wilkins: Time to review inflation-targeting framework
  • U.S. President Trump: Would like oil and Fed rates lower
  • New Zealand GDT auction yielded 3.5% drop in dairy prices
  • API private crude oil inventories down by 1.54M barrels

Major Events/Reports:

Risk-off flows carry on

After being the dominant sentiment in the earlier trading session, risk aversion extended its stay in financial markets as U.S. equity indices also closed lower and trade jitters lingered.

  • Dow 30 index is down 551.80 points to 24,465.64 (-2.21%)
  • Nasdaq is down 119.65 points to 6,908.82 (-1.70%)
  • S&P 500 index is down 48.84 points to 2,641.89 (-1.82%)

The tech sector rout is still being seen as the main culprit for the stock meltdown while geopolitical risks from Europe also remained in the background. Falling crude oil prices also dragged energy sector shares down while weak earnings weighed on retailers.

Another leg lower for crude

Black Crack chalked up more declines on speculations that the OPEC might refrain from curbing production or just announce minimal cuts. Note that Russia isn’t exactly on board with output restrictions at the moment, which means that the oil cartel might need to do more in order to keep prices afloat.

Remarks from the POTUS aren’t helping either, as Trump said that he would like to see crude oil lower. He upped the pressure on Saudi Arabia by stating:

“After the United States, Saudi Arabia is the largest oil-producing nation in the world. They have worked closely with us and have been very responsive to my requests to keeping oil prices at reasonable levels—so important for the world.”

Furthermore, the Donald warned that oil prices might “go through the roof” if the U.S. broke ties with Saudi Arabia.

BOC official Wilkins’ remarks

BOC Senior Deputy Governor Carolyn Wilkins suggested that the central bank might be rethinking its inflation-targeting framework. As with most monetary policy authorities, the BOC has been maintaining price stability and aiming for a 2% inflation target.

While this approach has worked for decades, Wilkins noted that this framework could be challenged in the future as long-term global rates keep falling. In this scenario, overall borrowing costs remain low despite central bank tightening efforts, making it a less effective policy tool.

Wilkins concluded:

“There is no doubt that our inflation-targeting framework has promoted the economic and financial well-being of Canadians. A decade of experience in the post-crisis world, though, shows us it is not perfect. It is time to conduct a thorough review of the alternatives.”

Major Market Mover(s):

USD

The Greenback was the one currency to rule them all as safe-haven flows persisted. The lower-yielding yen and franc weren’t too far behind, though.

USD/JPY is up from 112.30 to a high of 112.84; USD/CHF advanced from .9920 to .9956; EUR/USD slid to 1.1371, and GBP/USD is down from 1.2835 to 1.2787.

Commodity Currencies

The Aussie was already down in the dumps since the earlier trading sessions before being joined by its buddies, the Loonie and Kiwi, as the day went on.

AUD/USD fell further to a low of .7203; NZD/USD slumped from .6857 to .6787, and USD/CAD popped up from 1.3178 to 1.3306. AUD/JPY fell to 81.31; NZD/JPY is down to 76.48, CAD/JPY slipped to 84.67, and EUR/AUD is up to 1.5760.

Watch Out For:

  • 2:00 am GMT: New Zealand credit card spending y/y (7.8% previous)
  • 4:30 am GMT: Japanese all industries activity index (0.8% dip expected)