- Iran claims ceasefire deal has been breached.
- WTI prices grind higher
- The US dollar is trading with a mixed tone.
USDCAD open: 1.3857, overnight range 1.3839-1.3861, close 1.3845, WTI 97.64, Gold 4729.59.
The Canadian dollar drifted lower overnight, weighed down by mildly hawkish FOMC minute. That said, policymakers admitted it is too soon to gauge the economic fallout from the Iran conflict, which leaves the minutes with limited market relevance.
Canada’s political landscape shifted slightly as Mark Carney moved closer to a majority after a Sarnia-Lambton MP crossed the floor.
WTI traded in a 96.30-99.67 range, reflecting growing doubts about the durability of the US-Iran ceasefire as Israeli strikes in Lebanon continue. While the Strait of Hormuz is technically open, tanker traffic remains scarce as captains avoid what is widely believed to be a mined passage.
The US and Iran ceasefire is showing signs of stress. Tehran claims Israel has already breached three elements of the ten-point ceasefire, including strikes in Lebanon, while JD Vance insists Lebanon was never covered in the agreement.
FOMC minutes reinforced a cautious stance with some members flagging concerns about persistently elevated inflation, which gave the minutes a hawkish bias.
Equity markets are showing fatigue. Asia ended mixed, with Australia’s ASX 200 up 0.24%, Japan’s Topix down 0.90%, and Hong Kong’s Hang Seng slipping 0.54%.
European bourses are softer in early trade, with the DAX down 1.32%, CAC 40 off 0.93%, and FTSE 100 lower by 0.33%. US futures are under pressure and down 0.40%. Treasury yields are 4.279%, and the DXY is 98.97.
EURUSD traded in a 1.1651-1.1679 range, holding onto recent gains but lacking conviction. Ceasefire optimism is fading as reports of violations emerge, while elevated oil prices and limited tanker traffic through Hormuz keep uncertainty high. German industrial production disappointed, falling 0.3% m/m against expectations for a 0.9% rise. Intraday momentum remains constructive above 1.1590, with a break of 1.1730 opening the path toward 1.1840.
GBPUSD drifted in 1.3381-1.3415 range, supported by cautious optimism around the ceasefire but lacking follow-through buying. Traders remain wary of chasing the move, particularly after the slightly hawkish tone from the Fed minutes capped enthusiasm.
USDJPY rose in a 158.49-159.11 range, as elevated oil prices and restricted oil shipping flows underpin demand. The firmer tone in the Fed minutes added to the upside pressure.
AUDUSD traded in a 0.7023-0.7050 range, drifting sideways as cross-selling in AUDNZD capped rallies. Comments from RBNZ Governor Anna Breman, signalling a willingness to tighten policy further to combat inflation, weighed on the cross and limited AUD upside.
Today’s US data includes Q4 GDP which is expected at 0.7% y/y, unchanged and Core PCE (forecast 0.4% m/m). Initial Jobless Claims are expected at 210K versus 202K previously. The Canadian data calendar is empty.
