The Canadian dollar is sinking. Month-end and quarter-end portfolio rebalancing flows and fresh "third-wave" coronavirus fears are stoking U.S. dollar demand, and the Canadian dollar is caught in the crossfire. A few economists believe the Bank of Canada will announce Quantitative Easing tapering at the April 21 policy meeting. If so, it may indicate h Canadian rates are going higher sooner than expected. USD/CAD technicals are bearish while prices are below $1.2650
Wall Street closed on a mixed to weaker note which set the tone for Asia markets. China and Japanese equity indexes closed with gains while Australia’s ASX 200 dropped. The German Dax index is leading European equity indexes higher, while S&P 500 futures are in the red.
The surge in the U.S. dollar has sent gold prices tumbling. Since yesterday, the shiny metal dropped $45/ounce, fully erasing all the gains since June 2020. Oil prices are also suffering from U.S. dollar strength but not to the same extent. WTI is trading at $60.40/barrel, down from its overnight peak of $62.23. Prices are supported by reports that the Organization of the Petroleum Exporting Countries will extend production cuts until May and my expectations for a post-pandemic rebound in global demand.
EUR/USD is trading at a five-month low. Widening E.U/U.S interest rate differentials and an ultra-dovish European Central Bank are driving prices lower. The Eurozone’s ongoing coronavirus outbreaks and current lockdown measures sharply contrast with the US plan to have 200 million Americans vaccinated by the end of April. Traders ignored todays better than expected ESI Confidence data.
GBP/USD is trading in a $1.3732-$1.3782 range. Prices are supported by economic growth optimism from high numbers of U.K. vaccinations and the reopening of the economy. Upbeat comments by Bank of England officials are also underpinning prices.
USD/JPY blasted above the psychologically important 110.00 level and reached 110.39. The move was fueled by the spike in U.S. Treasury yields and Japanese year-end rebalancing flows. Japanese Retail Sales data was better than expected but still very weak.
AUD/USD and NZD/USD have been driven down by broad U.S. dollar strength, but both currencies are off their worst levels.
U.S. Consumer Confidence data is the only notable economic release today.
