- US recession predicted in 2023
- ECB President Lagarde reiterates hawkish rate outlook
- US dollar starts 2023 in demand-NZD weakest of the G-10 majors.
USDCAD snapshot open 1.3632-36, Range Dec 30-Jan 3, 1.3525-1.3651, close 1.3546, WTI $78.71, Gold $1833.89
The Canadian dollar started the new year on the defensive.
USDCAD rallied from the Asia open and continued in early NY trading with the rally fueled by safe-haven demand for US dollars and the prospect of sharply higher US interest rates.
The Bank of Canada is widely expected to pause hiking rates far sooner than the Fed and that view is underpinning USDCAD.
The Canadian dollar is not getting much support from higher oil prices. WTI is at $79.18/b in NY, after trading in a $77.75-$81.46/b since year end.
Markets were thin and choppy overnight due to Chinese data and the outlook for the US economy. Japanese markets were closed.
European stock indexes started the year on a positive note led by a 1.58% gain in the UK FTSE 100 and an 0.88% rise in the German Dax index. S&P Futures rallied early but are trading just above unchanged in early NY. The US 10-year yield is 3.773%
EURUSD dropped from 1.0708 at the December 30 close to 1.0521 in early NY due to increased risks from the Russian/Ukraine war and the prospect of higher US interest rates. Traders ignored hawkish comments by ECB President Christine Lagarde who stressed the need for higher rates to prevent inflation from “becoming entrenched.”
GBPUSD was derailed. Prices plunged from the 1.2100 December 30 close to 1.1902 in early NY as weak data and an ongoing rail strike weighing on the currency. Manufacturing PMI fell to 45.3 in December, a 31-month low. The GBPUSD technicals suggest the break below 1.2020 will extend losses to 1.1860. A Financial Times poll shows 4of 5 economists predict a recession that will be worse than the UK’s G-7 peers.
USDJPY traded erratically in a 129.52-131.12 range. Prices plunged in Asia then recouped all of the losses by the NY open. USDJPY is on the defensive due to anticipation the Bank of Japan ends its ultra-easy monetary policy and begins to raise interest rates.
AUDUSD traded negatively, falling from 0.6818 to 0.6696 due to broad-based US dollar demand, expectations the RBA will be less hawkish than the Fed, a weak RBA Commodity Index SDR, and Chinese data.
Today’s US data is second- tier.
