- Focus on Powell Congressional testimony today.
- Bank of Canada expected to leave rates unchanged.
- US dollar opens modestly higher compared to the close.
USDCAD snapshot open 1.3625-29, overnight range 1.3602-1.3641, close 1.3602, WTI $80.34, Gold $1843.10
The Canadian dollar was under pressure overnight due to broad US dollar demand against the G-10 major currencies.
Fed Chair Jerome Powell’s semi-annual testimony to Congress is highly anticipated as traders an analysts are hoping to get some clarity around the March 22 interest rate decision. Economists and analysts were forecasting a 25 bp rate increase until a number of strong economic reports caused some to speculate about a 50 bp hike.
The massive 517,000 gain in January employment combined with the higher than expected January inflation reading support a more aggressive Fed rate response. However, the February nonfarm payrolls and CPI reports will be released before the Fed meeting, which suggests Mr Powell will offer a neutral, “data-dependent” outlook.
Wall Street closed mixed to flat and that ambivalence carried over into Asia. The Australian ASX was the best performing major Asia index after gaining 0.49%, despite the RBA hiking interest rates. Japan’s Nikkei 225 index squeezed out a 0.25% increase while the major Chines indexes fell.
European bourses were subdued but are modestly higher as are S&P 500 futures. The US 10-year Treasury yield is steady at 3.936%.
EURUSD traded in a 1.0651-1.0694 band with prices continuing to benefit from yesterday’s hawkish comments by ECB policymaker Robert Holzmann. He said rates needed to rise by 50 bps and the next four ECB meetings.
GBPUSD is under pressure and traded in a 1.1978-1.2063 range. Bearish comments by BoE policymaker Catherine Mann, warning of a further fall further in GBPUSD on a more hawkish than expected Fed outlook, weighed on prices.
USDJPY tracked US 10-year Treasury yield price movements and traded in a 135.55-136.25 range.
AUDUSD is trading at 0.6661 in NY after peaking at 0.6747 in Asia due to a “dovish” outlook from the RBA. The central bank hiked the overnight rate by 25 bps to 3.60%, as expected. However, the statement implied policymakers were close to pausing further rate hikes after one more increase.
There are no top-tier US or Canadian economic reports due today.
