- Bank of England intervenes in bond market
- Hurricane Ian underpins WTI oil prices
- US dollar adds to gains
USDCAD snapshot: open 1.3803-07, overnight range 1.3717-1.3831, close 1.3724, WTI $78.23, Gold $1616.38
The Canadian dollar remains under pressure.
A wave of negative risk sentiment stemming from a lack of confidence in central bank leadership, geopolitical tensions, and the promise of higher US interest rates is fueling US dollar demand.
USDCAD broke above resistance in the 1.3770-1.3790 zone overnight, spiked to 1.3831, then churned in a 1.3725-1.3810 range.
There was no shortage of news to unnerve traders.
Global risk sentiment worsened following reports that the Nord Stream pipeline was sabotaged which worsened the European area energy crisis. It could have been a disaster except Russia had previously shut-off gas flows to protest European sanctions.
WTI traded with a bullish bias rising from $76.59/barrel to $79.30/b overnight. Opec may be considering further production cuts in addition to the 100,000 barre/day reduction that takes effect October 1 because of rising global recession risks reducing crude demand.
The news underpinned oil prices with West Texas Intermediate (WTI) getting an added lift from expectations of supply disruptions due to Hurricane Ian.
The pipeline story also boosted US Treasury yields. The 10-year Treasury yield climbed to 4.019% in Asia, before retreating. That spike knocked global stocks lower and drove the greenback higher.
Once again, the UK was at the forefront of market volatility.
The Bank of England intervened in the bond market in a move it said was need to “to restore orderly market conditions.” The statement noted that the “significant repricing of UK and global financial assets” significantly affected long term UK debt. The BoE statement said “Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability. This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy.”
The news knocked the US Treasury yield down to 3.888% before prices drifted higher while driving the US dollar down to Tuesday NY closing levels. However, the greenback has started to rebound.
GBPUSD traded in a 1.0633-1.0788 range prior to the intervention. The currency spiked to 1.0838 in the immediate aftermath but dropped to 1.0541 in NY.
EURUSD churned in a 0.9537-0.9602 range with gains capped by Fed/ECB interest rate divergence, and recession fears due to the Russian invasion of Ukraine.
USDJPY traded in a 144.40-144.80 band supported by higher Treasury yields, but gains are limited by BoJ intervention fears.
There are no notable US or Canadian economic reports today.
