- Oil surges on fears Trump will escalate Iran war
- ECB and BoE monetary policy meetings ahead
- The US dollar is trading defensively in early NY markets
USDCAD open: 1.3663, overnight range 1.3664-1.3691, close 1.3686, WTI 106.79, Gold 4,626.96
The Canadian dollar was churned overnight probably due to the Fed and BoC’s divergent monetary policy outlooks.
The Bank of Canada kept its benchmark rate at 2.25% and leaned heavily on the uncertainty argument. Macklem’s message boiled down to this: unless the data veers off course, any policy moves will be incremental at best, which the market reads as a long stretch on the sidelines. South of the border, the tone was different. The Fed’s communication leaned hawkish, and the dissenters were pushing to strip out any hint that rate cuts are even on the table.
WTI jumped above 110 before giving back a chunk of the move into the New York session. The driver is the worsening US Iran situation, with Washington now looking for help to keep the Strait of Hormuz open while also floating the idea of fresh strikes on infrastructure.
On the domestic front, February GDP is expected to come in at 0.2%, a slight pickup from January’s 0.1% pace.
The FOMC left rates unchanged at 3.75% and the statement had a hawkish bias as three voters wanted to remove the reference to the Committee having an easing bias.
Asian equities closed negatively. Australia's ASX 200 dropped 0.24%, Hong Kong's Hang Seng fell 1.28%, and Japan's Topix slid 1.19%.
As of 7:20 am, European bourses are mixed. The UK FTSE 100 has gained 1.31% while the German DAX is up 0.65%. The French CAC 40 has lost 0.26%. S&P 500 futures are up 0.36%, the 10 year Treasury yield is 4.396%, the DXY is 98.35, and gold (XAUUSD) is 4633.79.
EURUSD 1.1655-1.1698 EURUSD slipped after the Fed but is stabilizing into the New York open as traders position for an ECB decision that could lean hawkish. The complication is energy. Higher oil prices act as a tax on the region and may cap upside. Germany posted a modest quarterly gain, but broader Eurozone growth is softer and inflation pressures are sticky.
GBPUSD is tracking the euro’s recovery as the market waits on the Bank of England. Guidance is expected to be thin. Domestic politics are adding noise, with debate over carving defence spending out of fiscal rules unsettling the gilt market and tempering sterling enthusiasm.
USDJPY dropped sharply, likely on official action, even if not formally acknowledged. The setup made it vulnerable. US policy is tight, Japan remains accommodative, and positioning was stretched. Verbal intervention has also ramped up. Even so, rate differentials and higher energy costs continue to argue against a sustained yen rally.
AUDUSD is clawing back post Fed losses, helped by firmer Chinese PMIs and expectations the RBA may tighten again next week.
US data on tap: Personal Consumption Expenditures Price Index for March, weekly jobless claims, Employment Cost Index and Q1 GDP.
