The Canadian dollar traded sideways overnight, albeit with a modestly bullish bias. The currency is getting a bit of support from surging commodity prices, including oil.
West Texas Intermediate jumped 5% since yesterday morning, rising from $59.97 to $62.97. Prices have since slipped to $62.15, but the outlook is positive, according to analysts at Goldman Sachs. They are forecasting another $10.00/b increase do to lower expected inventories and higher marginal costs associated with restarting production.
Surging commodity prices have fueled AUD/USD and NZD gains. AUD/USD is trading at levels last seen in February 2018 driven by iron-ore price gains, expectations for a global economic rebound and a more benign central bank.
NZD/USD has tracked AUD/USD higher, supported by many analysts suggesting that the Reserve Bank of New Zealand may raise interest rates sooner than anticipated. The RBNZ meeting is tomorrow and they are unlikely to change monetary policy. However, they may express unhappiness at the currency level, which has risen 33% since March 2020.
U.S. Federal Reserve chair Jerome Powell’s testimony to Congress starts at 10:00 am. He is expected to push back against the reflation trade while tempering enthusiasm for equities. Markets will be volatile especially during the Q&A.
Bank of Canada Governor Tiff Macklem’s speech may be overshadowed by the Fed. The theme is the labour market impact from COVID.
U.S. Treasury Secretary Janet Yellen repeated her concerns about Bitcoin, describing it as a "highly speculative, inefficient digital currency, often used in illegal transactions." It wasn’t anything she hadn’t said before. Her remarks, and a delayed reaction to Elon Musk’s weekend observation that Bitcoin prices seemed high, helped drive BTC/USD down from $58,332.36 to $45,047.78 between yesterday and today.
Prices are just above the low in New York.
GBP/USD was the best performing currency pair overnight. Prices bottomed out at $1.3980 yesterday and peaked at $1.4096 overnight in a rally fueled by Prime Minister Boris Johnson’s reopening plans from the coronavirus lockdown. Price gains were exacerbated by broad U.S. dollar weakness. Traders ignored the U.K. employment report which was better than expected. Analysts believe the U.K. employment picture will deteriorate sharply when the government furlough program ends.
EUR/USD churned in a $1.2136-1.2179 range. Prospects for a global economic rebound and broad U.S. dollar selling pressures are underpinning prices while raising Treasury yields, and fear of reflation are capping gains.
Today’s data includes Case-Shiller Home Price Index and Consumer Confidence.
