USD/CAD is in focus ahead of the ADP and BOC decisions
The Bank of Canada should keep its overnight rate at 5%, leaving borrowing costs at a 22-year high.
Australia's economy barely grew in the third quarter. Gross domestic product rose 0.2% quarter-over-quarter (QoQ), marking an eighth straight quarter of growth, albeit its slowest in a year. That was short of forecasts of 0.4%. Annual gross domestic product (GDP) growth stood at 2.1%, little changed from the previous quarter. Household spending was flat quarter-on-quarter and has barely grown for four quarters in a row, its worst stretch since the global financial crisis. This slowdown is seen as a necessary consequence of Reserve Bank of Australia monetary tightening, and this latest data bolsters the case for the bank to no longer need to tighten.
Yesterday, job openings and labor turnover surADP (JOLTs) job openings decreased by 617,000 to 8.733 million, marking the lowest number of openings since March 2021. This triggered a modest reaction on Treasury bonds. In the details, the hires and separations data suggested that the job opening decline was due to unfulfilled opening listings being removed. The dollar hardly reacted to the news. In fact, the USD basket rose by 0.3% yesterday, hitting a two-week high. The real test for the greenback could come later, on Wednesday. At 1.15 p.m., automatic data processing (ADP) employment change. Economists anticipate that the US private sector will have created 130,000 jobs in November. Last month, private businesses added 113.000 workers, below expectations of 150,000 job creations.
The Bank of Canada
The Bank of Canada should keep its overnight rate at 5%, leaving borrowing costs at a 22-year high. The Bank of Canada (BOC) last held its prime rate on October 25th, and depending on inflationary risks, the Bank of Canada always said it would not hesitate to move rates higher. But there is very little risk at the moment. Headline consumer price index (CPI) came in at 3.1% in October. Inflation is still expected to return to the two percent target in 2025; however, the central bank says it expects inflation to be higher in the short term and projects inflation will average about 3.5 percent through the middle of 2024.
Rio Tinto has decided to bring forward the start of production from its giant Simandou iron ore project in Guinea to 2025, a year earlier than expected. Simandou is set to be the world's largest and highest-grade new iron ore mine. It will add around 5% to global seaborne supply when it comes online. First production is expected to ramp up over 30 months from 2025 to an annualised capacity of 60 million metric tonnes per year.
Rio Tinto owns two of the four Simandou mining blocks as part of its Simfer joint venture with China's Chalco Iron Ore Holdings and the government of Guinea. Of these 60 million metric tonnes, Rio Tinto's share will be 27 million metric tonnes. After an initial capital allocation of $6.2 billion to develop the mine, rail, and port infrastructure, Rio Tinto will have to ramp up capital expenditures. In 2023, the miner spent $7Bin on capex, of which $1Bin was growth capex. In the next three years, its growth capex estimate is $3 billion a year.
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