- BoC leaves rates unchanged.
- FOMC minutes point to another rate increase
- US dollar extends yesterday’s post-CPI slide overnight.
USDCAD snapshot: open 1.3394-98, overnight range 1.3389-1.3447, close 1.3442, WTI $83.14, Gold $2026.60
The Canadian dollar is grinding out gains in the wake of a broad-based US dollar sell-off following yesterday’s lower than expected headline US inflation report. CPI fell to 5.0% y/y in March compared to the forecast of 5.2% y/y and 6.0% in February.
The decline was due to lower costs. However, traders ignored the more important core-CPI number, which ticked up to 5.6% y/y from 5.5% previously. The US dollar ended the day sharply lower, but Wall Street closed with losses.
The FOMC minutes from the March 22 meeting indicated that Fed officials are more concerned about inflation than the market. At the time of the meeting, analysts were suggesting the Fed would leave rates unchanged due to concerns about financial stability from the banking crisis. The minutes revealed the "hold or hike" decision was close, but inflation proved to be the more important concern.The Canadian dollar got an added lift from higher oil prices. West Texas Intermediate rose from $79.30/barrel on Tuesday to $83.40/b overnight. Broad US dollar weakness and hopes that the Fed will soon cut rates helped to lift prices.
EURUSD traded in a 1.0978 to 1.1031 band due to broad US dollar weakness. The single currency saw a bit of support from ECB Governing Council member Francois Villeroy, who suggested higher interest rates are needed to prevent inflation from becoming entrenched.
GBPUSD rallied to 1.2528 from 1.2480-1.2524 despite less than stellar economic data. UK GDP growth was flat in February compared to the forecast for a 0.1% increase. Industrial and manufacturing production were also weak.
USDJPY traded in a 132.91-133.36 band. Dovish comments from Bank of Japan Governor Kazuo Ueda supported prices.
AUDUSD got a boost from a stronger than expected March employment report, and lower consumer inflation expectations. AUDUSD climbed from 0.6686 to 0.6734, with broad US dollar weakness exacerbating gains. Australia gained 53,000 jobs compared to the forecast for a gain of 20,000.
Today’s US data includes, weekly jobless claims, and Producer Price Index.
