- Rising Treasury yields drive US dollar higher.
- Rumours abound about Opec extending production cuts into Q2.
- US dollar opens with gains across the board-NZD underperforms.
USDCAD: open 1.3577-81, overnight range 1.3524-1.3588, close 1.3531, WTI $77.98, Gold, $2027.21
The Canadian dollar sank yesterday and dropped further overnight. Traders appear to have decided that perhaps the Fed's outlook for rates is correct. The Federal Open Market Committee's Summary of Economic Projections (SEP) released in December showed that policymakers expected Fed funds to fall by 75 bps in 2024. Traders decided that the officials were just kidding and priced in 150 bps of rate cuts.
Since then, a series of robust US economic reports combined with the hotter-than-expected January CPI report showed them the error of their ways. The US 10-year Treasury yield soared from 3.82% on February 1 to 4.33% yesterday. Those gains reignited demand for US dollars, and the US dollar index climbed to 104.05 in NY today from 102.88 on February 1.
Markets are looking ahead to today's US Q4 GDP data and Thursday's Core-PCE price index report and hoping for some fresh insight.
The Canadian dollar is not getting any support from oil prices. West Texas Intermediate (WTI) remains rangebound, albeit closer to the top than the bottom of its February range. Oil prices are slightly firmer thanks to rumors that OPEC may extend production cuts into Q2. Even so, the news merely provides support near the price floor but will not spark a rally because crude supply is expected to exceed demand for 2024.
EURUSD traded negatively in a 1.0796-1.0848 band. Eurozone Economic sentiment fell to 95.4 (previous 95.2), and Industrial confidence dipped to -9.5 from -9.3.
GBPUSD chopped around in a 1.2622-1.2689 range. Prices continue to garner a modicum of support from comments by BoE Deputy Governor Dave Ramsden yesterday. He reiterated that policymakers need more time to assess incoming data.
USDJPY tracked rising Treasury yield and rose to 150.88 from 150.38. Prices continue to creep higher despite the threat of intervention.
AUDUSD dropped to 0.6490 from 0.6550 due to broad US dollar strength. Traders ignored better-than-expected inflation data for January (actual 3.4% y/y, forecast 3.5%).
NZDUSD plunged to 0.6093 from 0.6178 after the RBNZ left rates unchanged at 5.50% but issued a somewhat dovish outlook.
US Q4 GDP and quarterly PCE data are on tap
