- Optimism abounds about early end to Iran war
- Oil prices sink, global stocks rally and DXY retreats.
- The US dollar on the defensive in early NY trading
USDCAD open: 1.3889, overnight range 1.3887-1.3920, close 1.3916, WTI 99.98, Gold 4724.02.
The Canadian dollar inched higher overnight, rising about 0.12% as markets latched onto growing optimism that Trump’s Iran conflict could wrap up quickly. Yesterday, Trump suggested the war may end within “two or three weeks.” Traders have taken those words at face value, despite a track record that argues for caution.
Yesterday, Canada’s latest growth data got some praise, after GDP rose 0.1% in January and a preliminary 0.2% gain is projected for February. That said, the broader picture remains underwhelming, with annual growth running at just 0.6%, and that figure does not yet reflect the economic fallout from the Iran conflict.
WTI oil prices have been anything but stable, falling sharply from 106.82 to 96.51 overnight before rebounding to 100.44 in New York trading. The swings reflect ongoing geopolitical tension, as Iran continues missile and drone strikes across the region, while the Strait of Hormuz remains shut, keeping supply risks firmly in play.
Treasury yields have pulled back from recent highs as traders pivot toward a slowdown narrative, judging that the Fed will place greater weight on weakening employment and growth risks than on a short-lived inflation bump driven by higher oil prices. That thinking faces a key test today with the March ADP employment report, where forecasts call for a gain of 40,000 compared to the prior 63,000.
Asian equities surged following the previous Wall Street rally, closing with strong gains across the region. Japan’s Topix jumped 4.95%, Hong Kong’s Hang Seng rose 2.04%, and Australia’s ASX advanced 2.24%.
As of 7:15 am, the German DAX is up 2.47%, the UK FTSE 100 has added 1.96%, and the French CAC 40 is ahead by 1.95%. S&P 500 futures are up 0.70%, the 10-year Treasury yield is 4.282%, and the DXY is 99.46.
EURUSD traded in a 1.1551-1.1611 range, extending the prior session’s rally. Improved sentiment around a potential end to the Iran conflict, expectations that the Fed remains in easing mode, and renewed concerns about ECB tightening driven by inflation are influencing flows. German and Eurozone Manufacturing PMI data improved in March.
GBPUSD traded in a 1.3220-1.3314 range and is sitting near the top of that band in New York, supported by broad US dollar weakness. UK Manufacturing PMI slipped to 51.0 from 51.4, reflecting uncertainty tied to the Iran conflict, although the data had little market impact.
Upside may be capped by revived expectations for Bank of England rate cuts, with short-term technicals bearish below 1.3410.
USDJPY traded in a 158.28-159.01 range before recovering to 158.61 in New York. Direction was pulled between generally supportive domestic data and the drag from elevated oil prices. The Tankan survey showed improved sentiment but flagged concerns about deteriorating conditions due to energy costs.
AUDUSD traded in a 0.6895-0.6953 range, building on the previous session’s gains as broad US dollar selling persisted on hopes of a de-escalation in the Iran conflict. Traders largely dismissed the drop in Manufacturing PMI to 49.8 from 51.0, attributing weakness to war-related uncertainty. The move higher appears corrective while prices remain below 0.7010.
US Retail Sales are expected to have risen by 0.5% m/m in February (0.2% in Jan). ISM Manufacturing PMI is expected at 52.5 (previous 52.4) and Business inventories are forecast to be unchanged at 0.1%.
