- FX trading light due to May Day holidays in Asia and UK
- Focus is on Wednesday’s FOMC meeting
- US dollar opens higher, JPY and GBP outperform
USDCAD Snapshot: open 1.2868-72, overnight range 1.2843-1.2878, previous close 1.2859, WTI open $101.53, Gold open $1,880.68
The Canadian dollar is under pressure on the first trading day in May. The other commodity currencies are suffering the same fate, as are the euro and Swiss franc.
The Canadian dollar took a turn for the worse on Friday after attempting and failing to make a break above resistance. USDCAD dropped to 1.2720 from 1.2810 after risk sentiment improved when Asian and European equity markets, and oil prices rallied. The gains were quickly erased when S&P 500 and DJIA equity futures could not get any upward traction and slid throughout the day.
Canadian dollar traders ignored Statistics Canada reporting robust Canadian economic growth in March. Canada's GDP jumped to 1.1% m/m compared to forecasts for a 0.8% increase. The gain forced analysts to upgrade their Q1 predictions to 5.6% from 4.0%.
Even better, the improvement was spread across 16 of 20 industries.
Despite the FX reaction, the domestic economic growth outlook, combined with firm to higher crude prices, should help offset Canadian dollar weakness from US demand stemming from the FOMC rate outlook.
Oil prices are choppy.
West Texas Intermediate (WTI) has swung between $95.50/barrel and $107.75 in the past week and is sitting at $100.80/b in NY. Prices are supported by reports Germany will halt Russian oil purchases by the end of September.
However, fears of higher US rates and China’s Covid crisis raise global economic slowdown fears, reducing oil demand.
The US dollar is in demand in early NY trading with gains exaggerated due to the holiday in London, reducing liquidity.
EURUSD traded in a 1.0511-1.0568 range and is trading near the bottom in NY. Gains were limited after ECB policymaker Luis de Guindos said that “a rate hike was possible in July, but unlikely.” A spate of weaker than expected EU economic data (Economic Sentiment, Industrial Confidence and Consumer Confidence) also encouraged EURUSD selling.
GBPUSD traders are looking ahead to Thursday’s Bank of England monetary policy meeting.
Forecasts for a 0.25% rate hike underpinned the currency, which traded in a 1.2541-1.2596 range.
USDJPY traded sideways in a 129.62-130.47 band, consolidating gains from last week and supported by the US 10-year Treasury yield trading at 2.914%.
NZDUSD and AUDUSD were closed for holidays and the currency pairs traded quietly, but with a negative bias.
US ISM Manufacturing PMI is ahead.
