- FOMC minutes may be overshadowed by debt ceiling concerns.
- RBNZ surprises market with dovish tilt.
- US dollar opens mixed while NZD underperforms.
USDCAD snapshot: open 1.3544-48, overnight range 1.3498-1.3549, close 1.3502, WTI $74.36, Gold $1975.79
The Canadian dollar is under pressure due as a lack of progress around the US debt ceiling discussions soured risk sentiment. However, it outperforms the other commodity currencies (AUD, NZD).
The Canadian dollar is seeing support after oil prices rallied. West Texas Intermediate climbed above $73.85/b overnight on renewed supply concerns.
The American Petroleum Institute reported that crude inventories fell by 6.79 million barrels in the week ending May 19.
More importantly, Saudi Arabia Energy Minister Prince Abdulaziz bin Salman warned speculators to “watch out.” He orchestrated the surprise million-barrel-per-day production cut announced on April 1 and yesterday he said “Speculators, like in any market, they are there to stay. I keep advising that they will be ouching. They did ouch in April. I don’t have to show my cards, I’m not a poker player, but I would just tell them, watch out.”
WTI rose from $71.70/b on Tuesday to $74.44/b in NY today.
The minutes from the May 4 FOMC meeting are released at 2:00 pm today. They may not cause much of a stir as recent comments from policymakers including Fed Chair Jerome Powell, indicate ta decision to hike or pause is data dependent. The minutes won’t change that view.
EURUSD traded in a 1.0749-1.0794 range. The German Ifo Business climate index fell to 91.7 from 93.4 due to more pessimistic expectations and concerns ahead of the summer. Nevertheless, broad US dollar demand is the main reason EURUSD is under pressure.
GBPUSD peaked at 1.2469 then plunged to 1.2366 in the wake of hotter than expected inflation. UK CPI rose 1.2% m/m in April (forecast 0.8%) and 8.7% y/y (forecast 8.2%). Optimists will point out that the y/y rate is well below the 10.1% in March.
The inflation data ensures the Bank of England will hike rates 25 bps on June 22. GBPUSD is in a downtrend channel between 1.2360-1.2480.
USDJPY traded sideways in a 138.24-138.73 range, supported by firm US Treasury yields.
AUDUSD fell from 0.6614 to 0.6569 due to negative risk sentiment, concerns around China’s slow economic growth and a depressed Westpac leading index (actual -0.3 vs 0.1 previously).
NZDUSD plunged from 0.6255 to 0.6133 following the Reserve Bank of New Zealand’s “dovish hike.” The RBNZ hiked rates by 25 bps to 5.5% as expected but surprised markets by announcing a pause.
European bourses opened in negative territory and continued to slide led by a 1.44% drop in the UK FTSE 100 index. S&P 500 futures are down 0.40%. The US 10-year Treasury yield is close to unchanged at 3.69%.
EURUSD traded in a 1.0749-1.0794 range. The German Ifo Business climate index fell to 91.7 from 93.4 due to more pessimistic
expectations and concerns ahead of the summer. Nevertheless, broad US dollar demand is the main reason EURUSD is under pressure.
GBPUSD peaked at 1.2469 then plunged to 1.2366 due to hotter than expected inflation. UK CPI rose 1.2% m/m in April (forecast 0.8%) and 8.7% y/y (forecast 8.2%). Optimists will point out that the y/y rate is well below the 10.1% in March.
The inflation data ensures the Bank of England will hike rates 25 bps on June 22. GBPUSD is in a downtrend channel between 1.2360-1.2480.
USDJPY traded sideways in a 138.24-138.73 range, supported by firm US Treasury yields.
AUDUSD fell from 0.6614 to 0.6569 due to negative risk sentiment, concerns around China’s slow economic growth and a depressed Westpac leading index (actual -0.3 vs 0.1 previously).
NZDUSD plunged from 0.6255 to 0.6133 following the Reserve Bank of New Zealand’s “dovish hike.” The RBNZ hiked rates by 25 bps to 5.5% as expected but surprised markets by announcing a pause.
Analysts expected a hawkish statement due to still high inflation, and labour market pressures. The RBNZ didn’t see it that way. The statement said, “A pause would also allow more time to assess the impact of the significant tightening, and the timing of any further increases that might be needed.
NZDUSD plunged from 0.6255 to 0.6133 following the Reserve Bank of New Zealand’s “dovish hike.” The RBNZ hiked rates by 25 bps to 5.5% as expected but surprised markets by announcing a pause.
There are no Canadian economic reports today.
