- Global equity indexes recoup some losses
- Gold drops 3.5% as risk sentiment improves
- US dollar softer as it consolidates recent gains.
USDCAD Snapshot: open 1.2806-10, overnight range-1.2773-1.2819, close 1.2820, WTI open $92.82, Gold open $1910.98
The Canadian dollar has recovered about 50% of its “Russian invasion” losses even as West Texas oil slid from $100.46/barrel yesterday to $91.89/b today. It is a headline-driven market and likely to remain so today.
Canada joined the major Western economies in announcing a barrage of punitive sanctions aimed at Russia for its invasion of Ukraine. The sanctions have not prevented Russian troops from marching into the capital city of Kiev, which suggests that Ukraine will soon be back in the arms of mother-Russia. President Putin’s view is that all Ukrainian’s over 30 years old were born Russian citizens, so it isn’t an invasion , but just a “forced reconciliation.”
WTI prices dropped due to profit-taking and after traders realized that none of the myriad sanctions aimed at Moscow impacted Russia’s energy exports. Europe gets a huge amount of oil from Russia and leaders were loathe to take any measures that would disrupt those oil shipments. Prices were also weighed down after the US released more barrels from its Strategic Petroleum Reserves.
Risk sentiment turned positive yesterday, after speeches form Fed policymakers suggested it was “business as usual.” Cleveland Fed President Loretta Mester said the Fed is on track to raise rates if inflation doesn’t moderate but added that “The implications of the unfolding situation in Ukraine for the medium-run economic outlook in the US will also be a consideration.”
Atlanta Fed President Raphael Bostic admitted that the Fed should consider the medium-term impact of the invasion, but his focus was still on how many rate hikes in 2022.
Richmond Fed President Thomas Barkin was direct. He said “I have said publicly I think it is timely for us to normalize policy. The logic for that is underlying demand is strong. Labor market is tight. And inflation has been high and broadening. The logic for normalization I think rests on those premises.”” However, he hedged himself by saying “We are going to have to see whether this Ukrainian situation changes that narrative. And I just think time will tell.”
EURUSD is poised to finish the week far weaker than where it started, and it is trading in the middle of its 1.1167-1.1228 overnight range, in NY. Eurozone data, which included Consumer Confidence, Economic Sentiment, and Industrial Confidence, was dismissed as irrelevant in light of the Russian invasion.
GBPUSD traded in a 1.3370-1.3438 range overnight, with prices tracking broad US dollar sentiment.
USDJPY rallied from 115.16 to 115.62, alongside the rebound in the US 10-year Treasury yield to 1.99% in early NY trading.
US Durable Goods Orders, PCE Index, and Michigan Consumer Sentiment are ahead, but geopolitics will overshadow the results.
