- WTI oil trades at $101.00/b
- Canada GDP is forecast at 6.2% y/y, 0.1% m/m
- US dollar opens lower compared to Monday
USDCAD Snapshot: open 1.2667-71, overnight range-1.2655-1.2683, close 1.2669, WTI open $98.52, Gold open $1925.72
The Canadian dollar managed to grind out gains yesterday then consolidated the move overnight. However, the Canadian dollar is reacting more to the ebb and flow of global risk sentiment than to the surge in oil prices.
West Texas Intermediate (WTI) traded in a $95.37-$99.21/barrel overnight. That changed in early New York when prices surged to $101.50/b on renewed fears that the Russia-Ukraine war will disrupt oil supplies, at time when global demand was expected to rise. News that the US and its allies were contemplating a coordinated release of 60 million barrels from the Strategic Petroleum Reserves, and the expected Opec 400,000 barrel production increase failed to stop the WTI rally.
The Canadian economy is expected to have grown 6.2% y/y in Q4 even as December growth slowed to 0.1% m/m from 0.6% m/m. The news is overshadowed by geopolitical developments and by expectations that the Bank of Canada will raise interest rates by 0.25% at Wednesday’s meeting.
The US 10-year Treasury yield dropped from 1.867% to 1.723% yesterday after the Russian/Ukraine peace talks failed. Yields consolidated the losses overnight and are trading at 1.735% as of 6:55 am ET. S&P 500 futures are down 1.0%, and gold gained 1.35%.
EURUSD is under pressure, falling from 1.1232 to 1.1168. The single currency suffers from its proximity to the Russia/Ukraine conflict and the dovish ECB monetary policy outlook. ECB policymaker Ollie Rehn admitted a risk of stagflation but said the current situation would not lead to the 1970’s era of high inflation low growth.
GBPUSD traded in a 1.3388-1.3435 range with prices weighed down by risk aversion demand for US dollars and supported by EURGBP selling.
USDJPY is trading at the bottom of its 114.72-115.28 range, weighed down by falling Treasury yields and safe-haven demand for yen.
AUDUSD rose from 0.7248 to 0.7288 benefiting from higher commodity prices. The Reserve Bank of Australia (RBA) left the OCR rate unchanged at 0.10%, as widely expected. The statement reiterated that the cash rate would not rise until inflation was sustainably in the 2-3% target band.
The US data calendar includes Construction Spending, and SIM Manufacturing PMI for February.
