· Oil prices rebound sharply
· Fed Chair Powell said it is time to retire transitory
· Commodity currencies open higher
USDCAD Open 1.2749-53, Overnight Range 1.2728-1.2785, Previous close 1.2779, WTI open $69.29, Gold open $1786.45
The Canadian dollar began December the way it ended November-in a volatile manner. USDCAD bounced between 1.2720 and 1.2835 since Monday and prices continue to trade with a bullish bias, as global risk sentiment bounces between positive and negative.
News of the latest corona virus variant, Omicron, continues to destabilize markets. The variant is highly transmissible, and cases are being discovered around the globe. The South African doctor who first identified the strain said the cases were mild. The World Health Organization labeled it a “variant of concern,” and many governments imposed new travel restrictions.
The news sent global financial markets into a tailspin.
Then, Fed Chair Jerome Powell threw gasoline into the fire. After stubbornly insisting that rising inflation was “transitory,” Mr Powell bowed to reality and told Congress it was time to retire the word.
Wall Street stocks nose-dived, and the US dollar soared on the news. West Texas Intermediate (WTI) oil dropped to $64.65/barrel.
The move didn’t last, and risk sentiment turned positive, again. WTI rebounded rising to $69.46/b overnight with prices underpinned by the American Petroleum Institute reporting crude stocks fell 0.747 million barrels last week. However, gains are capped until Thursday Opec meeting when analysts expect news on production quotas.
The other commodity currencies, the Australian and New Zealand dollars, fared better than the Canadian dollar. AUDUSD rallied on the back of higher iron ore prices and better than expected economic growth news. Manufacturing PMI was 59.2 in November compared to 58.2 in October. GDP Rose 3.9% y/y in Q3 compared to the forecast for a 3.0% increase, although the Q/Q growth was down 1.9%.
EURUSD traded in a 1.1240-1.1381 range yesterday and 1.1304-1.1359 overnight. EURUSD was underpinned by speculation that Powell’s acknowledgment of higher inflation would force the ECB to a similar move. Modestly weaker Manufacturing PMI data and coronavirus concerns in Europe capped gains and prices retreated to 1.1315 in early NY.
GBPUSD is trading at session lows in NY, after trading in a 1.3278-1.3331 range overnight. Nationwide Housing and BRC Shop Price Index data releases had limited impact.
USDJPY bounced between 112.55 and 113.95 this week as the US 10-year Treasury yield see-sawed in a 1.431%-1.545% range.
Fed Chair Jerome Powell continues his Senate testimony today. Markets will be looking for more insight to his inflation outlook.
US economic data includes ISM Manufacturing PMI (forecast 61 vs previous 60.8) and ADP employment change (forecast 525,000).
