- Risk sentiment sours as Trump unhappy with Iran peace plan
- Oil prices surge and gold sinks.
- The US opens with gains across the board.
USDCAD open: 1.3655, overnight range 1.3613-1.3657, close 1.3628, WTI 99.74, Gold 4,606.93
The Canadian dollar erased Monday's gains as Trump gave Iran's three-stage proposal a lukewarm reception at best, leaving the pair at the mercy of whatever the next headline brings. Two central bank decisions tomorrow, BoC and FOMC, suggest minimal FX action today.
Wednesday's BoC decision is shaping up as a non-event. Inflation is nudging higher but remains inside the target band, leaving the Bank little reason to move.
Ottawa releases its Spring Economic Update today which will not have any impact on USDCAD trading.
Crude is doing the heavy lifting on the risk side. WTI is up 3.5% and traded between 96.26 and 100.10 overnight, driven by growing conviction that the Hormuz situation has no near-term resolution.
Global risk sentiment took a turn for the worse after Trump expressed unhappiness with the latest peace proposal tendered by Iran. That spooked traders who are worried about a prolonged crisis which also triggered a spike in oil prices.
Asia's session closed mostly in the red. Topix bucked the trend with a 0.99% advance while the ASX 200 gave back 0.64% and the Hang Seng retreated 0.95%.
European bourses are mixed at 7:20 am. The FTSE 100 is ahead 0.39%, the CAC 40 has added 0.19%, and the DAX is unchanged. Stateside, S&P 500 futures are pointing 0.38% lower. The 10-year Treasury yield stands at 4.364%, the DXY at 98.75, and gold (XAUUSD) at 4,601.97.
EURUSD erased Monday’s gains and traded in 1.1691-1.1727 band. The disappointment around the US and Iran talks and the surge in crude prices, drove prices lower. Thursday's policy meeting may provide some relief as the tone is expected to lean hawkish.
GBPUSD traded poorly in a 1.3487-1.3543 range due to the broader risk-off tone from the Iran impasse and end-of-month selling. There is also some political uncertainty over Prime Minister Starmer's tenure due to his poor judgement in naming Peter Mandelson as US Ambassador.
USDJPY whipsawed in a 158.96-159.69 range around the Bank of Japan decision. The rate was held at 0.75%, but three dissenting votes in favour of a 25 bp hike gave the announcement a hawkish bias. Rising oil prices fueled the rally..
AUDUSD drifted in a 0.7162-0.7195 band with firm to steady commodity prices providing a floor as are expectations for the RBA to raise rates next week.
On the US data front, ADP employment, Case-Shiller Home Prices, and Consumer Confidence are all due today.
