- China/US tensions elevated
- Global stocks slide, Treasury yields plunge
- US dollar opens on mixed note
USDCAD Snapshot open 1.2864-68, Monday & Overnight range 1.2769-1.2876, Friday close 1.2795, WTI oil $93.17, Gold $1774.79
The Canadian dollar is under pressure due to broad risk aversion sentiment. US Speaker of the House Nancy Pelosi is visiting Taiwan today, much to the chagrin of China.
Beijing has its knickers in a knot as Ms. Pelosi’s visit to the independent island country is an affront to Chinese President Xi Jinping’s claim that Taiwan is merely a province of China. For years, western politicians wanted to curry favor with the Chinese government to boost trade and attract investment, so they acquiesced to China’s demands to not formally recognize Taiwan. Even though the US has complied, Ms Pelosi’s visit flips the bird to that notion.
Chinese Foreign Ministry spokesman Zhao Lijian said, “A visit to Taiwan by her would constitute a gross interference in China’s internal affairs ... and lead to a very serious situation and grave consequences.” Adding fuel to the fire, the Peoples Liberation Army (PLA) engaged in live fire exercises off the Taiwan coast. The US Navy has a couple of strike groups in the south China Sea.
The escalation of US/China tensions, combined with news that the Al Qaeda leader Ayman al Zawahiri came out second best in a drone altercation, and another nuclear test from North Korea, knocked global equity indexes lower overnight.
Asia stocks closed deep in the red, except for Australia’s ASX 200, which finished slightly higher. European bourses are flat to lower while Wall Street futures are down.
USDCAD traders are looking to Friday’s Canadian employment report even though it should have little impact on trading as the Bank of Canada is focused on inflation.
EURUSD traded in a 1.0207-1.0299, supported by expectations for additional ECB rate hikes but gains were capped due to the fall-out from the Ukraine war.
GBPUSD traded from a 1.2159 low on Monday to 1.2278 ahead of Thursday’s Bank of England meeting. The markets expect a 50 bps rate hike.
USDJPY lost 3%, falling to 130.40 from 134.45 as the US 10-year Treasury yield dropped to 2.51%, in addition to safe-haven demand for yen.
AUDUSD is trading near the bottom of its 0.6918-0.7046 range despite the RBA hiking rates 50 bps as the statement was somewhat dovish.
There are not any top tier Canadian or US economic reports today.
