- US ADP and ISM service data ahead.
- Iran/US tensions escalate
- US dollar opens with a small bid, yen underperforms.
USDCAD open: 1.3664, overnight range 1.3629-1.3674, close 1.3642, WTI 63.40, Gold 5053.00
The Canadian dollar is consolidating yesterday’s losses after global risk sentiment soured due to increased Middle East tensions. The Loonie’s direct continues to be determined by broad US dollar sentiment.
WTI oil jumped from 61.09 to 64.19 following reports that the US Navy shot down an Iranian drone near an aircraft carrier. The episode has sharpened fears that strained Iran-US relations are at risk of worsening. A further escalation would increase the likelihood of disruption in the Strait of Hormuz, putting as much as 20 million barrels per day of supply at risk.
The delay in the release of the nonfarm payrolls report slated for Friday puts today’s ADP employment change data front and center. The consensus looks for a modest rise to 48,000 from 41,000, a level that remains historically soft and reinforces arguments for easier policy. ISM Services is also expected to ease, slipping to 53.5 from 54.4.
Asian equity markets largely brushed off the Wall Street sell-off, with most regional indexes finishing higher. Australia’s ASX 200 gained 0.80%, Japan’s Topix advanced 0.27%, and Hong Kong’s Hang Seng ended little changed.
As of 7:15 am, European markets were mostly firmer with the French CAC-40 up 1.19% and the UK FTSE 100 leading with a gain of 1.37%. The German DAX is flat, and S&P 500 futures are up 0.24.%, The US Dollar Index is 97.54,and the 10-year Treasury yield is 4.276%.
EURUSD traded in a 1.1805–1.1839 range, slipping to its session low early in New York trading. Attention is squarely on US data, which, if it disappoints as expected, could open the door to a push toward 1.1900. That said, caution ahead of Thursday’s ECB meeting may limit follow-through amid talk that policymakers could flag concerns over euro strength. Eurozone January HICP rose 2.0% m/m but slowed to 1.7% y/y from 1.9%. Germany’s composite PMI printed at 52.1 versus a 52.5 forecast, while the services component eased to 52.4 from 53.3.
GBPUSD traded in a 1.3691–1.3733 range and continues to hold an intraday upward bias while prices remain above 1.3670. The Bank of England is widely expected to leave rates unchanged at tomorrow’s meeting, supported by a run of UK economic data that has come in stronger than anticipated.
USDJPY traded in a 155.70–156.86 range, rallying to the top of that band into the New York session. The move reflects expectations that Prime Minister Sane Takaichi’s government will secure a decisive election victory, clearing the way for an expansionary fiscal agenda.
AUDUSD traded in a 0.7010–0.7044 range and held on to most of its post-RBA rate hike gains. Support has come from firmer Chinese PMI readings alongside a broader rebound in commodity prices.
