- Markets mildly risk positive in low volume trading
- S&P 500 futures attempting to rally
- US dollar opens lower compared to Friday
USDCAD snapshot open 1.3646-50, overnight range 1.3632-1.3689, close 1.3697, WTI $74.57, Gold $1795.74
The Canadian dollar is drifting with a negative bias after a quiet overnight session, underscored by low volumes.
USDCAD continues to probe resistance in the 1.3700 area after the recent Bank of Canada and Fed monetary policy divergence. The BoC hinted that it would pause hiking rates at its December 7 meeting while the Fed projected another 75 bps of rate hikes in early 2023.
The subsequent widening of CAD/US interest rate differentials in favour of the US is undermining the Canadian dollar.
Oil prices are not giving the Canadian dollar any support either. West Texas Intermediate has been trending lower since early in November and that downtrend remains intact while prices are below $77.75/barrel. Opec’s decided to leave production levels unchanged in January preferring to see the impact of the G-& oil price cap on Russian seaborne crude. Prices are also depressed due to increased recession fears for the US.
EURUSD climbed from 1.0583 to 1.0657 partly due to a rebound in the German Ifo index which rose to 88.6 in December, from 86.4 in November. The current assessment component improved to 94.4 from 93.2 an Expectations were better than expected at 83.2 (forecast 82).
ECB Vice President Luis De Guindos said there would be more rate hikes and that the central bank would not consider tweaking its inflation goal. EURUSD remains supported following President Christine Lagarde’s hawkish press conference. The intraday EURUSD technicals are bullish above 1.0570.
GBPUSD rallied overnight rising from 1.2134 at Friday’s close to 1.2241 in Europe, before sliding to 1.2190 in NY. GBPUSD’s failure to extend gains above 1.24 50, followed by the break below the November uptrend line at 1.2250, suggests further losses to 1.1700 on a move below 1.2030. GBPUSD remains vulnerable to the downside due to the dovish Bank of England’s monetary policy outlook compared to the hawkish ECB and Fed.
USDJPY traded defensively in a 1.3576-136.60 range due to reports that the BoJ may tweak its inflation target, although no changes are likely until Governor Kuroda retires in April.
AUDUSD is in the middle of its 0.6684-0.6731 range. The lowest New Zealand Westpac Consumer Confidence report in 30 years (actual Q4 75.6 vs Q3 87.6) knocked NZDUSD to 0.6371 from 0.6408.
There are no top tier US economic reports today.
