The Canadian dollar broke the 80-cent ceiling overnight, but the gains were driven by external factors. U.S. dollar sellers came out of the woodwork and the greenback slid against the G-10 majors.
Federal Reserve Chair Jerome Powell and his colleagues have successfully pushed back against concerns that rising U.S. inflation would force the Fed to raise interest rates well ahead of schedule. 10-year Treasury yields, which were at 1.753% at the end of March, are trading at 1.583% today. That slide knocked USD/JPY 110.70 April 5 to 108.10 today.
USD/CAD fell from $1.2635 March 30 to $1.2475 overnight, and it may have further to fall due to negative U.S. dollar sentiment and steady to firm oil prices.
The Federal government will table Canada’s first budget in over two years at the close of business today. Back in the day, the FX market punished governments with massive budget deficits by selling the currency. Not any more. The latest budgets from a number of G-10 countries showed huge deficits and traders didn’t even blink. The coronavirus pandemic gave policymakers a green-light to spend and spend. That suggests tonight’s budget will not be a factor for FX traders.
Russia appeared to up the ante in Ukraine. Tensions are already elevated because of the Russian military build-up along the Ukraine border and now the Russian Navy has sent to ships into the Black Sea. That news may have weighed on U.S. bond prices, but was ignored in FX markets.
Asia equity indexes closed with gains except for Australia’s ASX200, and Japan’s Nikkei 225 which were close to unchanged European bourses are mixed and Wall Street futures are modestly lower. Oil and gold prices extended Friday’s rally and oil prices inched lower.
EUR/USD climbed from $1.1941 to $1.2041. Thursday’s European Central Bank monetary policy meeting is expected to be a non-event. The short term technicals are targeting $1.2110.
GBP/USD rallied from $1.3811-$1.3900 due to broad U.S. dollar weakness and hopes for a robust economic rebound. A decisive break above $1.3910 to targets $1.4010.
USD/JPY dropped from 108.83 to 108.82 due, the soft 10-year Treasury yields. The antipodean currencies tracked the U.S. dollar moves.
