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- Risk sentiment turns positive as equities rise.
- FOMC minutes show policymakers are timid.
- US dollar sinks on-EUR outperforms.
USDCAD: open 1.3454-58, overnight range 1.3505-1.3441-1.3508, close 1.3504, WTI $78.05, Gold, $2029.85
The Canadian dollar came to life overnight and snapped its nearly two-month downtrend due to a positive shift in global risk sentiment.
The minutes from the January 31 FOMC meeting were essentially a non-event. They didn’t provide any additional insight into the outlook for US rates, as a slew of comments from policymakers following the meeting already told us what officials were thinking.
The minutes showed that policymakers believe rates were at their peak for this tightening cycle but indicated they were in no hurry to start reducing them. "Most participants noted the risks of moving too quickly to ease the stance of policy and emphasized the importance of carefully assessing incoming data in judging whether inflation is moving down sustainably to 2 percent."
The catalyst for the shift in risk sentiment was Nvidia’s earnings report. The tech company's focus on AI proved to be a winner. Its profits soared to $12.3 billion in the quarter ending January 28, a huge increase from the $1.2 billion reported in January 2023. That news helped fuel equity market rallies around the world. The S&P 500 futures index has climbed 1.27% this morning.
Canada retail Sales data for December are expected to show a rebound from the November results. Retail Sales ex-autos are expected to be 0.7% (November -0.5%). The data is unlikely to have much impact on the Canadian dollar as the focus is on the US equity market.
EURUSD rose from 1.0815 to 1.0888 after February PMI data, pointing to improved prospects for the Eurozone economy. However, a Hamburg Commercial Bank economist noted that "The latest HCOB PMI figures are likely to disappoint the ECB.”
GBPUSD bounced in a 1.2631-1.2710 range following mixed PMI data. Services PMI was unchanged at 54.3, Manufacturing PMI was 47.1, and Composite PMI was 48.9 (January 47.9).
USDJPY traded in a 150.01-150.47 band with prices supported by the US 10-year Treasury yield at 4.323%.
AUDUSD traded in a 0.6542-0.6596 range, supported by rebounding Chinese stock markets and an improved risk sentiment tone.
It remains to be seen if today's US weekly jobless claims (forecast 218,000) or Existing Home Sales data derails the rallies.
