- Canadian dollar benefiting from improved risk sentiment
- Traders awaiting Thursday’s US inflation report
- US dollar opens lower compared to Monday-CAD and AUD underperform
USDCAD snapshot open 1.3387-91, overnight range 1.3378-1.3408, close 1.3390, WTI $75.18, Gold $1875.30
The Canadian dollar traded choppily in a narrow range overnight with traders awaiting Fed Chair Jerome Powell’s remarks from Sweden, today.
The recent Canadian dollar gains are due to recent US economic reports (hourly wages and ISM services PMI) which were weaker than expected. The soft data raised hopes that the Fed dial back its aggressive rate hike outlook.
However, San Francisco Fed President Mary Daly and Atlanta Fed President Raphael Bostic didn’t agree. Mr Bostic advocated for rates to rise above 5.0% in Q2 and then to stay there of a “long time.” He said, “I am not a pivot guy.” Ms Daly was slightly less hawkish but still wanted to see a 25 bp rate hike at the next meeting. She said the Fed is “seriously data dependent” but needs to see how the previous hikes have impacted the economy.
Those comments halted a stock market rally and put a bit of a floor under the US dollar.
USDCAD technicals turned bearish Friday with the move below the 100-day moving average at 1.3472 which suggests further losses toward the 200-day moving average at 1.3150. That outcome will only be seen if the S&P 500 index stages a rally above 4000.
EURUSD traded sideways in a 1.0722-1.0751 range ahead of Powell’s remarks. ECB Executive Board member Isabel Schnabel was hawkish saying, “Interest rates will still have to rise significantly at a steady pace to reach levels that are sufficiently restrictive to ensure a timely return of inflation to our 2% medium-term target.”
GBPUSD traded quietly in a 1.2141-1.2197 range. Yesterday BoE Chief Economist Huw Pill said that the threat of persistent inflation “will ease” if BoE forecast for economic slack to emerge and unemployment rises, are accurate.
USDJPY chopped about in a 131.39-132.28 range with prices tracking risk sentiment and US treasury yields. The 10-year yield rose from 3.517% at the close to 3.547% today.
AUDUSD is trading at the bottom of its 0.6878-0.6927 range ahead of Australian CPI data and Retail Sales on Wednesday. CPI is expected to rise to 7.3% from 6.9%.
There are no US reports of note today.
