- Equities ignoring Fed-speak warning of 0.50% rate hikes
- RBA meeting expected to end with hawkish statement
- US dollar squeezes higher compared to Friday’s open
USDCAD Snapshot: open 1.2500-04, overnight range-1.2487-1.2587, close 1.2512, WTI open $98.63, Gold
open $1,926.08
The Canadian dollar traded quietly as it consolidated recent gains following the break of the long term
USDCAD uptrend on March 24.
The Canadian dollar benefits from high oil prices, even though West Texas Intermediate (WTI) had
dropped to $98.83/barrel from $128.55/b when Russia invaded Ukraine. The current price point is well
above the 2021 average price which is supporting the Loonie.
The Bank of Canada Business Outlook Survey and Survey of Consumer Expectations are released today.
The surveys will predate Russia’s invasion of Ukraine but will still show concerns about rising production
costs, labour supply issues, and rising inflation.
If so, it would also solidify the case for the Bank of Canada to raise interest rates by 0.50% at next week’s
monetary policy meeting. BoC officials have expressed elevated concerns for the level of inflation and
officials may be planning to front-load rate hikes.
It’s an ugly start to the week. Reports of Russian troops committing atrocities in Ukraine and China
sending 2,000 soldiers to facilitate healthcare workers in fully locked down Shanghai have traders
thinking War and Virus. In addition, nuclear-armed Pakistan is undergoing another political crisis, with
incumbent cricket-player President Imran Khan losing the support of his military benefactors.
The US administration is turning a blind eye to reports that Chinese energy companies are violating
sanctions and lining up to buy heavily discounted Russian crude.
A rash of hawkish Fed-speak suggesting a couple of 0.50% rate hikes would be needed to put a lid on
inflation has traders pricing the fed funds terminal rate (or neutral rate) above 3.0%, according to ING
analysts.
There is plenty of debate about whether the latest yield curve inversion signals a looming recession. The
US 10 year yield is 2.402%, while the 2-year yield is 2.457%.
EURUSD traded with a negative bias in a 1.1000-1.1053 range. Talk of fresh sanctions after Ukraine
accused Russia of targeting civilians combined with the prospect of higher US rates have traders looking
for a break below 1.0980.
GBPUSD matched EURUSD moves and traded in a 1.3095-1.3136 range. Prices climbed in Asia and
dropped in Europe.
USDJPY rallied to 122.83 from 122.28 due to rising US Treasury yields.
