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USD / CAD - Canadian dollar awaiting Powell and Macklem speeches

- Markets are caution ahead of Fed Chair Powell speech.

- President Biden gives State of the Union address tonight.

- US dollar opens mixed-Commodity bloc outperforms.

USDCAD snapshot open 1.3419-23, overnight range 1.3403-1.3446, close 1.3447, WTI $75.65, Gold $1872.10

The Canadian dollar is bopping and weaving inside the well-defined USDCAD 1.3220-1.3700 range which has contained price action since mid-November. That is unlikely to change today, even after speeches from Fed Chair Jerome Powell, Bank of Canada Governor Tiff Macklem and US President Joe Biden.

Global markets are in a state of flux. Friday’s blow-out US nonfarm payrolls report have forced many participants to reassess their view that the Fed inflation and interest rate outlook was erroneous.

Mr Powell’s comments in his post-FOMC meeting were hawkish. He reiterated that US rates needed to go higher and repeated that “I don’t see us cutting rates this year.” No matter how you slice it, those two comments are hawkish.

Minneapolis Federal Reserve President Neel Kashkari agrees. In an interview on CNBC this morning, he said “We need to raise rates aggressively to put a ceiling on inflation, then let monetary policy work its way through the economy.”

Equity traders are not convinced. The S&P 500 index rallied after the FOMC meeting then erased the move after Friday’s NFP data. However, the decline was rather shallow and as traders appear to be downplaying policymaker comments.

EURUSD is at the bottom of its overnight 1.0698-1.0743 range. A flurry of hawkish comments by ECB officials recently are more than offset by concerns of hawkish comments by Fed Chair Powell today. The single currency also suffered from weak German Industrial Production data (IP) for December. IP dropped 3.1% m/m and 3.9% y/y. ING economists said, “This is a simply horrible report.”

GBPUSD traded in a 1.1982-1.2056 range, peaking in Asia then bottoming out in early NY. The support from somewhat hawkish comments by BoE officials yesterday has eroded in the face of the looming Powell speech today. The January Halifax House Price Index rose 1.9% y/y 3m, compared to expectations for a 0.3% decline.

USDJPY traded with a negative bias, falling from 132.70 in Asia to 131.70 just before NY opened due to Labour Cash Earnings data showing wages rose 4.8% y/y in December compared to the forecast for a 0.9% increase y/y. USDJPY bounced to 132.10. due to lingering concerns about the appointment of another dovish BoJ Governor and higher US Treasury yields.

AUD rallied in a 0.6884-0.6950 range after the RBA raised rates 25 bps to 3.35%. It was the ninth consecutive increase and the statement said there would be further increases to ensure inflation returns to target. Some analysts expect the OCR will climb over 4.0% before the RBA pauses.

NZDUSD followed AUDUSD higher, rising from 0.6302 to 0.6341.