- UAE bails out of Opec
- Trump warns of prolong Iranian port blockade.
- The US dollar is nursing small gains ahead of FOMC
USDCAD open: 1.3693, overnight range 1.3672-1.3693, close 1.3682, WTI 103.57, Gold 4,555.32
The Canadian dollar edged lower on broad US dollar demand after the Wall Street Journal reported Trump had directed officials to prepare for a prolonged blockade of Iranian ports. The news boosted the greenback as oil prices rallied.
WTI crude traded a 98.43-103.80 range overnight and prices remain elevated in New York. Markets are hoping that the news of the UAE exiting OPEC means higher crude production which is not impacted by the Strait of Hormuz due to a UAE pipeline.
The Carney government's Spring Economic Update delivered the usual assortment of promises and was roundly ignored by USDCAD traders. For now, the Loonie takes its cues from oil sentiment and Trump's Iran campaign, with the USMCA renegotiation serving as a slow-burning drag in the background.
The Bank of Canada is expected to leave rates unchanged, reassure markets it is watching the data closely, and offer little else in the way of forward guidance.
Today is likely Jerome Powell's last day presiding over the FOMC press conference as Kevin Warsh is expected to assume the Fed Chair role by May 15. Rates are universally expected to remain on hold. Most Fed officials appear to have pivoted away from labour market concerns toward the inflation risk posed by tariffs, setting the stage for a hawkish policy statement.
Asian equities were mixed, with Australia's ASX 200 slipping 0.27% while Hong Kong's Hang Seng gained 1.68%. Japanese markets were shut for a holiday.
As of 7:15 am, European bourses were broadly lower, paced by a 0.77% decline in the UK FTSE 100. The French CAC 40 shed 0.51% and the German DAX edged down 0.12%. S&P 500 futures were flat, the 10-year Treasury yield stood at 4.356%, the DXY was at 98.68, and gold (XAUUSD) was trading at 4,568.33.
EURUSD traded in a tight range of 1.1694-1.1721, with little conviction on either side. Eurozone Economic Sentiment slid from 96.2 to 93, Business Climate deteriorated modestly, and Consumer Confidence held steady. German HICP inflation figures are due later in the session, though the broader market remains in a holding pattern ahead of this afternoon's FOMC decision.
GBPUSD range 1.3495-1.3528 saw muted price action with a slight downside tilt, as the sharp rally in oil prices acted as a headwind. Attention remains split between today's Fed decision and tomorrow's BoE meeting.
USDJPY held a bid tone within a 159.51-159.84 range, underpinned by climbing oil prices and the BoJ's decision to stand pat on rates. Short-yen positioning has stretched to a two-year extreme, with the market seemingly testing the BoJ's tolerance for further weakness, a situation complicated by the geopolitical uncertainty surrounding Trump's military posture toward Iran.
AUDUSD churned between 0.7151-0.7195 as stronger-than-expected inflation collided with a crude oil spike. Headline CPI printed at 4.6% y/y in March, up sharply from 3.7% in February, adding weight to the case for an RBA rate hike next week. The oil-driven growth concerns took the shine off the inflation beat, leaving the pair directionless.
On the US data front, the releases February Durable Goods orders, March Building Permits, and March Housing Starts.
