- Hawkish Fed-speak boosts the 10-year Treasury yield
- Russia/Ukraine war weighs on EURUSD
- US dollar opens modestly lower, except against Yen
USDCAD Snapshot: overnight range 1.2570-1.2616, previous close 1.2610, WTI open $106.59, Gold open $1,977.79
The Canadian dollar traded sideways with a mildly bullish bias in an uneventful overnight session. USDCAD fell from 1.2642 yesterday to an overnight low of 1.2570 before grinding back to 1.2610 in early NY trading.
Global markets fully reopened following the long Easter weekend, and traders were cautious due to a mix of Russian aggression and concerns around the US interest rate outlook.
Monday, St Louis Fed President James Bullard said that US interest rates should rise to 3.5% by the end of 2022 due to inflation rising to a 40-year peak. Traders really took notice when he suggested a 0.75% rate hike “shouldn’t be ruled out.”
His comments are not anything new, but they were enough to send the US 10-year Treasury yield soaring to 2.908% overnight from a low of 2.828% yesterday.
Asia equity indexes closed on a mixed note. Japan’s Nikkei 225 and Australia’s ASX 200 indexes gained 0.69% and 0.56%, respectively, while Hong Kong’s Hang Seng fell 2.26%. The Chinese markets are weighed down by the ongoing COVID outbreak in Shanghai and other regions. Traders may get some relief if the Peoples Bank of China (PBoC) cuts the Reserve Requirement Ratio (RRR) on Wednesday, as rumoured.
European bourses are in negative territory, led by a 0.74% drop in the German Dax index. The latest Russian offensive in Ukraine is weighing on risk sentiment. DJIA and S&P 500 futures are flirting around unchanged, while gold prices are lower.
EURUSD traded in a 1.0762-1.0812 range with prices weighed down by the Russia/Ukraine war and the US interest rate outlook. The European Central Bank (ECB) appears reluctant to raise interest rates in the face of rising inflation because they fear such a move would exacerbate the economic slowdown occurring from the Russian hostilities. Officials also believe that inflation increases are mainly due to supply chain disruptions and that inflation will fall to targeted levels by 2023.
Meanwhile, EU and US interest rate differentials are widening in favour of the US, which adds to the EURUSD woes. The intraday EURUSD technicals are bearish below 1.0840.
GBPUSD drifted in a 1.2990-1.3039 band with prices tracking broad US dollar sentiment. Traders are also concerned that the Bank of England may delay raising UK rates due to a slowing economy.
USDJPY surged to a 40-year peak of 128.45 due to the jump in the US 10-year Treasury yield. The gains are fueled by the BoJ Yield Curve Control (YCC) policy which caps JGB yields at 0.25%.
AUDUSD and NZDUSD firmed after analysts upgraded interest rate hikes in both countries.
