The Canadian dollar traded sideways in Asia, rallied in early European trading, then retreated into the New York open. The price action was somewhat noisy due to support from oil price moves, equity index gains, and coronavirus vaccine news offset by higher U.S. Treasury yields. Yesterday’s better than expected Gross Domestic Product report provides some support for the currency.
West Texas Intermediate oil prices closed on a negative note yesterday after the American Petroleum Institute reported crude inventories rose 7.3 million barrels in the week ending February 26. However, rumours that the Organization of the Petroleum Exporting Countries (OPEC) and Russia will delay scheduled production hikes for April 1, lifted WTI from $59.25/barrel to $61.07/b. The Canadian dollar climbed on the news but has since given back most of the gains.
U.S. President Biden promises COVID-19 vaccines for all American’s by May 31.
The news improved global risk sentiment.
Asia equity indexes closed with solid gains led by Hong Kong’s Hang Seng index rising 2.70%. European indexes are higher but off their best levels, while Wall Street equity index futures are higher.
U.S. 10-year Treasury yields are trading at 1.452%, up from the overnight low of 1.398%, which has given the US dollar broad support.
EUR/USD traded in a $1.2059-$1.2113 range, with the low occurring in early New York trading. Soft Eurozone data and higher Treasury yields fueled selling. The Eurozone economy is vulnerable to a double-dip recession as both Composite and Services PMI readings for February were below the 50 thresholds.
The Bundesbank President and European Central Bank Board Members said they must carefully analyze the increase in bond yields and could adjust the pace of PEPP purchases. EUR/USD technicals are bearish below $1.2130.
GBP/USD traded in a $1.3938-$1.4005 range overnight and is trading very erratically at the time of writing because the U.K. budget is being tabled. The furlough scheme was extended to the end of September as expected and corporate taxes increased.
USD/JPY rallied on the back of higher U.S. treasury yields. The Japanese government extended Tokyo coronavirus measures until March 21.
AUD/USD popped to 0.7837 from 0.7809 after Q4 GDP rose a better than expected 3.1% (forecast 2.5%). The move didn’t last as broad U.S. dollar strength drove prices back to 0.7809 in early New York trading. NZD/USD mirrored AUD/USD moves.
U.S. Institute for Supply Management Services Purchasing Managers Index is forecast to be unchanged at 57.7
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
