- FOMC minutes due today
- European equities and US equity futures give up overnight gains
- US dollar stages early morning rally
USDCAD Snapshot: open 1.2836-40, overnight range 1.2812-1.2874, close 1.2821, WTI open $111.42, Gold open $1,856.75
The Canadian dollar is trading like a yo-yo since yesterday as traders react to the S&P 500 index movements.
USDCAD jumped sharply on Tuesday, rising from 1.2769 in Asia to 1.2868 by mid-day in NY, before sliding to 1.2821 at the close. Prices climbed steadily overnight, opened at 1.2838 today then accelerated higher, reaching 1.2874 in early trading. The catalyst for the rally is sliding S&P 500 futures which dropped from 3,945.00 to 3,919.
Equity traders are skittish. There is plenty of talk about stagflation permeating the US economy, interspersed with a mixed message from Fed policymakers. Earlier, St Louis Fed President James Bullard warned that a0.75% rate hike should not be ruled out if the Fed was going to successfully manage inflation. Yesterday, Cleveland Fed President Raphael Bostic muddied the waters when he suggested that rates should remain unchanged at the September meeting. He said, “I have got a baseline view where for me I think a pause in September might make sense.”
The FOMC minutes are the focus today and they will not be available until 2:00 pm ET. Traders will be looking for a discussion about the neutral rate and a debate if any, about the risk of a recession.
EURUSD is giving back some of this week's gains. Prices peaked at 1.0747 yesterday on the back of hawkish comments from ECB policymakers, then drifted down to 1.0656 in NY today. The EURUSD rally contrasts with rising Eurozone recession risks which Rabo bank analysts suggest will be unavoidable if the EU adopts a Russian oil embargo. The February EURUSD downtrend is intact below 1.0750.
GBPUSD traded sideways in Asia, then fell from 1.2559 to 1.2486 in NY due to a modest rebound in the US dollar against the majors. The UK is expected to announce a “mini-budget” on Thursday in an effort to provide some relief from higher energy prices.
USDJPY clawed back some of Tuesday’s losses, rising from 126.66 to 127.28, partly because the 10-year US Treasury yield inched higher and firmer oil prices.
NZDUSD soared to 0.6512 from 0.6424 after the RBNZ raised rates by 0.50% to 2.0%. The move was universally expected, and prices have drifted to 0.6462 in NY as the focus shifts to the US dollar and the FOMC minutes.
US Durable Goods Orders are expected at 0.6% in April, down from 1.1% in March.
