- Loonie rises on prospect of hawkish BoC outcome.
- BoJ and ECB monetary policy meetings this week.
- US dollar opens on cautious note-narrowly mixed.
USDCAD: open 1.3422-26, overnight range 1.3414-1.3447, close 1.3430, WTI $73.45, Gold, $2022.81.
The Canadian dollar is the best-performing major G-10 currency since Friday's open, although its gains are minimal.
The Canadian dollar is grinding higher due to analysts suggesting that the Bank of Canada will adopt a somewhat hawkish bias at their monetary policy meeting on Wednesday. That's because inflation isn't behaving the way Governor Macklem expected. In December, he said, "underlying inflation pressures are easing in much of the economy." Unfortunately, the December inflation data, released last week, begged to differ. It rose more than expected. The prospect that domestic rate cuts would be delayed until the summer is undermining the Canadian dollar.
Bank of Canada Governor Tiff Mackem and his team have totally bungled the inflation file. They were wrong when they claimed surging inflation, post Covid, was temporary, and Macklem's forward guidance on inflation has also missed the boat. Policymakers know it and are overhauling their economic models.
Asian equity markets closed with gains following the record close on Wall Street. Japan's Nikkei 225 index rose 1.62%, while Australia's ASX gained 0.75%. European bourses are all in the green led by a 0.56% rise in the French CAC 40 index. S&P 500 futures are up 0.35%. Gold (XAUUSD) dipped to $2025.28 due to reduced odds for the Fed to ease in March, while the US 10-year Treasury yield is steady at 4.12%.
EURUSD is near the bottom of its 1.0882-1.0910 range and is underpinned by hawkish comments from some policymakers, including President Christine Lagarde. They have said it is too early to talk rate cuts. The EURUSD uptrend from November is intact above 1.0830.
GBPUSD traded in a 1.2687-1.2725 band as traders appear to have dismissed Friday's weaker-than-expected Retail Sales data. The GBPUSD uptrend from November is intact above 1.2610.
USDJPY traded cautiously in a 147.74-148.31 range. Prices are supported by firm US Treasury yields, but gains are capped ahead of the BoJ meeting and a possible tweak to the yield curve control cap (YCC).
AUDUSD drifted in a 0.6581-0.6614 range. Prices were weighed down by ongoing China economic growth concerns.
NZDUSD traded quietly in a 0.6100-0.6139 band with domestic markets closed for a holiday.
There is no US data of note today.
