- Risk sentiment improves.
- Global equity indexes climbing on hopes for US rate hike pause.
- US dollar trading inches lower overnight
USDCAD snapshot: open 1.3546-50, overnight range 1.3532-1.3580, close 1.3558, WTI $73.67, Gold $1967.38
The Canadian dollar is consolidating this weeks gains just above the peak levels as global risk sentiment stays positive.
USDCAD dropped from 1.3580 to 1.3532 overnight, before ticking higher to 1.3543 in NY trading. The short term technical outlook is bearish after prices failed to break above resistance at 1.3800, then dropped below the 1.3640-60 support area this week. The 1.3610-1.3630 area is a strong support area stemming from previous USDCAD lows and from the 100-day moving average.
Bank of Canada deputy governor Toni Gravelle’s speech yesterday proved to be a non-event more markets. He did not provide any insight into upcoming monetary policy decisions, and merely regurgitated the trite “we are ready to act in the event of severe market stress.” Of course they are. That’s why they exist.
The Canadian dollar is squeezing out gains because of widespread US dollar selling pressures as a result of it being month and quarter-end and because markets are re-assessing their outlook for US interest rates.
The FOMC was expected to raise rates by 25 bps at the May 3 meeting, but now the CME FedWatch tool suggests the odds for such a move are less than 44%. Traders believe the Fed will err on the side of caution following the recent banking strife while being encouraged by signs inflation is falling.
EURUSD rose from 1.0825 to 1.0884 due to broad US dollar weakness from month-end flows. Eurozone data was not much of a factor.
GBPUSD is at the top of its 1.2295-1.2363 range due to month and quarter end demand for sterling. Analysts at Morgan Stanley suggest that GBPUSD is vulnerable due to the risk that the BoE leaves rates unchanged while the ECB continues to hike its rates.
USDJPY traded in a 132.21-132.80 range supported by the unwinding of JPY safe-haven trades and by Japanese year end flows.
AUDUSD rallied to 0.6717 from 0.6663, before retreating in early NY markets.
US weekly jobless claims are expected to rise by 5,000 to 196,000 while Q4 GDP will be 2.7% y/y.
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