- US authorities step-in to avert another banking crisis.
- Markets are quiet with European markets closed for May Day.
- US dollar opens modestly higher while consolidating Friday’s losses.
USDCAD snapshot: open 1.3572-76, overnight range 1.3536-1.3580, close 1.3546, WTI $75.21, Gold $1984.95
The Canadian dollar looked like it would fall off a cliff Friday morning. It teetered, but not only pulled itself back to safety, stage an impressive rally.
Canada’s economy grew far slower than anticipated in February, rising a mere 0.1% compared to the forecast for a 0.2% gain.
Of course domestic events did not have anything to due to with the Canadian dollar price action. It was all down to risk sentiment and the outlook for Wednesday’s Fed meeting.
Canadian’s are awakening to news that the week-long strike by the Public Service Alliance of Canada has ended, after employees accepted a 12.5% wage increase and a $2,500 one-time pension payment. Private sector workers can only dream of the riches bestowed to public sector employees.
Global market actively was sharply curtailed today as a large swathe of Europe and the UK markets were closed for the May Day holiday.
Markets are digesting the news that US banking authorities forced the sale of First Republic Bank to JP Morgan Chase. JPM gets all the assets while the Federal Deposit Insurance Corporation (FDIC) shares in all losses.
EURUSD is flitting around the 1.1000 area after trading in a 1.0989-1.1038 range overnight. The ECB is expected to hike rates on Thursday, but traders are undecided if the hike will be 50 bps or 25 bps. Recent lower than expected inflation data has many analysts suggesting a 25 bp increase is the most likely.
GBPUSD is at the bottom of its 1.2516-1.2568 range, coinciding with modest demand for US dollars in a very quiet European session.
USDJPY rose from 136.21 to the 200 day moving average at 136.98. USDJPY remains in demand after the BoJ put the kibosh on monetary policy tightening for between 12 to 18 months.
AUDUSD rallied steadily, rising from 0.6609 to 0.6944 due to broad US dollar weakness in anticipation of a dovish FOMC result. Traders ignored a prediction from WestPac Chief Economist Bill Evans who said the RBA will leave rates unchanged at 3.60% tomorrow, which will be the peak rate for this hiking cycle.
US ISM Manufacturing PMI and Construction Spending data are ahead.
