- Risk sentiment turns negative.
- US and Canadian economic calendars are empty.
- US dollar consolidates Friday’s gains-CAD outperforms.
USDCAD snapshot: open 1.3360-64, overnight range 1.3345-1.3374, close 1.3358, WTI $82.38, Gold $2010.61
The Canadian dollar managed to outperform its peers after market risk sentiment turned negative against a backdrop of US economic data and hawkish comments from Fed officials.
Friday, US March Retail Sales were weaker than expected (actual -1.0% m/m, vs forecast -0.2%) which reminded traders of recession risks from a slowing economy. Those risk were exacerbated after the Michigan the year ahead Consumer Inflation Expectations data rose to 4.6% from 3.6% in April.
Fed Governor and voter Christopher Waller warned of higher rates saying, “Because financial conditions have not significantly tightened, the labor market continues to be strong and quite tight, and inflation is far above target, so monetary policy needs to be tightened further.”
Mr Waller’s words and the economic data spooked traders. The US 10-year Treasury yield soared from 3.38% to 3.55% today, the US dollar rallied, and Wall Street closed in the red.
The Canadian dollar performed admirably in the storm, deriving some shelter from stick oil prices. West Texas Intermediate (WTI) stayed above $80.00/barrel as traders looked to renewed Chinese demand in the face of the latest Opec production cuts to boost demand.
EURUSD closed at 1.0993 Friday after falling from 1.1075. The single currency consolidated those losses in a quiet overnight session due to a lack of economic data as traders digested the latest outlook for US interest rates. The hawkish comments and the prospect of higher US rates for longer overshadowed hawkish-speak from ECB officials. EURUSD technicals are bullish above 1.0910.
GBPUSD traded negatively in a 1.2376-1.2427 range after falling from 1.2545, Friday. The drop below 1.2420 snapped the uptrend line from March 15, leaving GBPUSD vulnerable to further losses to 1.2280. Traders are looking ahead to inflation data on Wednesday. Bloomberg reported that more than ½ of economists surveyed expect the Bank of England to leave rates unchanged on May 11.
USDJPY rallied from 132.18 Friday to 134.21 today, powered by the surge in the US 10-year Treasury rising from a low of 3.38% to 3.536%.
AUDUSD consolidated Friday’s losses in a 0.6692-0.6718 range on the back of negative risk sentiment. The RBA minutes from April 4 are due tomorrow.
There are no US or Canadian economic reports today.
