- FX churns due month-end flows and geopolitics.
- Canada Q4 GDP due Tuesday
- US dollar opens with modest losses while consolidating Friday’s gains.
USDCAD snapshot open 1.3593-97, overnight range 1.3589-1.3623, close 1.3607, WTI $76.31, Gold $1810.54
The Canadian dollar pulled back from the brink on Friday after testing major resistance when the US January Personal Consumption Expenditures=Price Index data was sharply higher in January than in December.
PCE rose 0.6% m/m compared to 0.2% in December while the Fed’s key barometer, Core-PCE also rose 0.6% compared to an upwardly revised 0.3% previously. That put the cat among the pigeons.
The US dollar soared, and stocks sank. USDCAD climbed from an Asia low of 1.3530 to 1.3662 by mid-morning before drifting lower for the rest of the day. The overnight session was fairly quiet and the currency pair did not get much traction in either direction.
Canadian dollar traders are looking ahead to Tuesday’s Q4 GDP report which is expected to show the economy slowing to 1.5% y/y. The results may not have much impact on USDCAD due to the Bank of Canada decision to pause hiking interest rates.
Global markets started this week cautiously due to a mix of top tier-economic reports later in the week, geopolitical tensions, and upcoming month end portfolio rebalancing flows.
The G-20 Finance ministers failed to issue a communique following this weekends meeting in India. The overwhelming majority “strongly condemned the war in Ukraine and stressed that it is causing immense human suffering and exacerbating existing fragilities in the global economy."
Not surprisingly, Russia and China refused to sign the document forcing the Indian host to issue a “Chair’s Summary.”
Whitehouse National Security Adviser Jake Sullivan warned China against supply weapons and ammunition to Russia. He said “I think it would alienate them from a number of countries in the world, including our European allies, and it would put them for square into the center of responsibility for the kinds of war crimes and bombardments of civilians and atrocities that the Russians are committing in Ukraine.”
The major Asian equity indexes closed with losses led by a 1.13% plunge in Australia’s ASX 200 index. European bourses opened positively and extended the gains during their morning, with the French CAC-40 index gaining 1.67%. S&P 500 futures have risen 0.48%
The US 10-year Treasury yield is ticking higher, rising from Friday’s close of 3.94% to 3.97% in NY.
EURUSD traded in a 1.0534-1.0568 range with Euro area Economic Sentiment, Industrial Confidence and Services sentiment data not having any impact.
GBPUSD climbed from 1.1924 in Asia to 1.1989 in NY supported by speculation that the EU and UK will announce a new agreement on the Northern Ireland Protocol.
USDJPY consolidated Friday’s post-PCE gains and traded in a 136.01-136.55 range. Prices are supported by the rise in the US 10-year Treasury yield from 3.877% on Friday to 3.97% today.
AUDUSD drifted in a 0.6700-0.6740 range with prices weighed down by lower commodity prices.
