??????- Stocks tumble after White House inflation warning
- German CPI and ZEW Survey put pressure on ECB
- US dollar grinds on gains on surging Treasury yields
USDCAD Snapshot: open 1.2657-61, overnight range 1.2632-1.2660, close 1.2634, WTI open $97.18, Gold open $1,953.40
The Canadian dollar was sideswiped yesterday after the White House warned of soaring inflation. The currency spent the overnight session on the defensive but managed to recoup most of its losses in early NY trading.
Press Secretary Jen Pataki did her best Donny Trump imitation when she said, “We expect March CPI headline inflation to be extraordinarily elevated due to Putin’s price hike.” (Remember Trump’s “China virus” or “kung fu covid”?)
Her comments crushed bonds and accelerated losses on Wall Street, with the S&P 500 losing 1.69% and the DJIA dropping 1.19%. The sell-off continued in Asia, where Japan’s Nikkei lost 1.81%, and Australia’s ASX 200 fell 0.42%. Hong Kong’s Hang Seng Index and the Shanghai Shenzhen rose 0.52% and 1.96% on talk of fresh stimulus. European bourses are in the red, led by a 0.90% drop in the German Dax. S&P 500 futures have recouped overnight losses and are close to unchanged in NY trading. Gold prices are modestly higher at $1,955.35, and WTI oil is $98.12/b.
USDCAD started yesterday’s session with a bid and climbed steadily, rising from 1.2575 and closing at 1.2634. Prices continued to climb overnight but stalled at the 1.2660 resistance area. A move above would extend gains to 1.2690, while a break below 1.2620 suggests a re-test of 1.2550.
Today’s US inflation report will determine the direction, at least for a short term. March CPI is expected to jump to 8.4% y/y compared to 7.9% y/y in February. That estimate should be baked into current S&P 500 and USDCAD levels, suggesting a lower or “as expected” result may lead to a rebound in equities and a retreat in the US dollar.
EURUSD traded in a narrow 1.0854 to 1.0887 range weighted down by the surge in US treasury yields. German and Euro area ZEW Surveys were weaker than last month, confirming fears of negative growth from Russia’s invasion of Ukraine.
GBPUSD traded sideways in a 1.2995-1.3037 range. Traders ignored better than expected UK employment data.
USDJPY rallied from 125.12 to 125.75, coinciding with the 10-year Treasury yield jumping to 2.836% from Monday’s low of 2.744%.
NZDUSD traded with a bit of a bid, rising from 0.6808 to 0.6841 in NY, underpinned by expectations that the RBNZ will raise interest rates by 0.50% at the Wednesday monetary policy meeting.
