- Recent data encourages Fed patience.
- Oil prices grinding higher on geopolitical tensions.
- US dollar consolidating yesterday’s gains.
USDCAD: open 1.3560-64, overnight range 1.3555-1.3585, close 1.3573, WTI $85.33, Gold, $2260.51.
The Canadian dollar had a short lived rally yesterday which lasted until the US ISM Manufacturing report was released. It was not rate-cut friendly data. Manufacturing PMI was 50.3 in March, topping the consensus estimate for a 48.4 reading and above the February reading of 47.8. It was the first time the manufacturing sector was in expansion territory since March of 2022. In addition, Manufacturing Prices Paid rose to 55.8 from 52.5 which suggests it is costing companies more for materials. Friday’s PCE inflation data combined with yesterday's data reveals a US economy that continues to grow while inflation pressures remain sticky.
Today’s JOB Openings Survey is expected to show that the labor market tightness is starting to ease, but it is the pace of the easing that will influence interest rate decisions.
Geopolitical tensions ratcheted up a notch yesterday after Israel bombed a terrorist compound in Damascus, which happened to kill two Iranian generals. The fact that the generals were in the compound is confirmation that it was a terrorist base. Gold traders drove the price of the shing metal to $2,266.80 from $2,187.57 last Thursday.
Ukraine is claiming its drones damaged another Russian oil terminal and the news is underpinning West Texas Intermediate prices which rose from $83.86 to $85.44 overnight.
The Bank of Canada’s Business Outlook survey (BOS) showed that inflation was moderating but consumer expectations remained elevated, which gives policymakers an excuse so leave rates unchanged at the April 10 meeting.
The JOLTS Job Openings data is expected to show that job openings declined in March, which, if correct, is an indication that the labor market is normalizing.
EURUSD is trading with a negative bias in a 1.0724-1.0745 range due to widening ECB and US interest rate differentials and expectations for a dovish outcome at the next ECB meeting on April 11. Eurozone and German Manufacturing PMI data continue to show a sluggish manufacturing sector, which is also a EURUSD negative.
GBPUSD traded in a 1.2539-1.2574 range. Prices are weighed down by expectations that US interest rates remain at elevated levels while the Bank of England’s next move will be a rate cut. GBPUSD intraday technicals are bullish above 1.2550. A move below 1.2550 targets 1.2370.
USDJPY was steady in a 151.50-151.80 band. Finance Ministry officials continue to warn about “excess” currency moves, but traders think actions speak louder than words.
AUDUSD bounced in a 0.6483-0.6512 range. Australian inflation rose 0.1% m/m in March (previous -0.1%). The RBA minutes showed policymakers did not consider hiking rates, but the news was ignored.
