- Safe-haven demand for US dollars knocks Loonie lower
- US 10-year Treasury yield hits 3.20% sinking Wall Street equity futures
- USD opens with gains across the board
USDCAD Snapshot: open 1.2830-34, overnight range 1.2900-1.2948, previous close 1.2908, WTI open $107.86, Gold open $1,864.13
The Canadian dollar continued to slide overnight.
Another wave of risk-aversion swept across financial markets after weaker than expected Chinese trade data raised risks for a global economic slowdown. Chinese exports rose 3.9% y/y in April, well below the 14.7% recorded previously. The weak results were due to the governments harsh lockdown measures in Shanghai and analysts fear a similar move in Beijing.
Asian stock markets followed Friday’s weak NY close and ended the day with steep losses. Hong Kong’s Hang Seng Index plunged 3.81%,
Japan’s Nikkei 225 dropped 2.53% and Australia’s ASX 200 lost 1.18%. The trend continued in Europe with the French CAC index leading the other indexes lower, dropping 2.16%. S&P 500 futures were down over 2.0% at one point but clawed back some of the losses.
The chief catalyst for the equity market weakness was the surge in the US 10-year Treasury yield to 3.20% in Asia before they inched lower in NY. Bond traders fear the Fed will have to raise interest rates significantly higher than “neutral rate” to defeat inflation.
The ongoing war between Russian and Ukraine also risks derailing global economic growth due to oil disruptions and other supply chain issues. President Putin told Russian citizens the invasion was a preemptive strike against NATO’s plans to invade Russia.
West Texas Intermediate oil prices are at their overnight low of $106.30/b after peaking at $110.39/b. Prices are supported by expectations that sanctions on Russian oil exports will exacerbate supply constraint issues. However, gains were capped by reports Saudi Arabia cut prices for oil exports to Asia and by Chin economic growth concerns.
The Canadian dollar was caught up in the wave of US dollar safe-haven demand but is close to major technical support which should be a drag upon further losses. In addition, the Bank of Canada will match or exceed Fed rate hikes, adding another layer of support to the currency.
EURUSD was steady in a 1.0496-1.0573 range with the top achieved in early NY trading as S&P 500 futures bounced from overnight session lows.
GBPUSD bounced from a low of 1.2262 to 1.2401 in NY, tracking Wall Street futures but gains are capped by UK recession risks.
USDJPY rallied from 130.41 to 131.34 on the back of higher US Treasury yields and Bank of Japan minutes reinforcing the dovish policy outlook.
AUDUSD traded lower, falling from 0.7079 to 0.6986 due to fears of a Chinese economic growth slowdown and by broad US dollar strength.
The US data calendar is empty.
