- Risk aversion recedes.
- WTI oil drops as supply disruption fears fade.
- US dollar gives back some of Friday’s gains.
USDCAD: open 1.3739, overnight range 1.3734-1.3783, close 1.3776, WTI $84.8, Gold, $2349.74
The Canadian dollar fell sharply on Friday due to US data and escalating geopolitical tensions. The University of Michigan Consumer Sentiment index showed inflation concerns inching higher which fed into the fewer Fed rate cut narrative. In addition, Iran promised to attack Israel which stoked risk aversion. The result was that USDCAQD climbed from 1.3689 to 1.3784.
Iran did attack Israel as they had promised and Israel has thus far had restraint.
The market focus quickly shifted back to US rates.
Asian equities closed negatively led by a 0.74% drop in Japan’s Nikkei 225 index. European bourses are in the green except for the UK FTSE 100 index which is down 0.13%. S&P 500 futures are up 0.56% even though the US 10-year Treasury yield rose to 4.583% from Friday’s 4.499% close.
EURUSD traded modestly firmer, rising from 1.0633 to 1.0665 but it is well below Friday’s 1.0732 peak. The repricing of Fed rate cuts to just one or two in 2024 combined with the ECB’s intention to cut rates in June is weighing on prices.
GBPUSD is climbing out of the hole it fell into on Friday when prices dropped to 1.2426 from 1.2560, with prices rising from a low of 1.2441 to 1.2491 in NY trading. The gains are on the back of global risk aversion being dialed back but the short term technicals are bearish below 1.2520. UK employment data for March is released on Tuesday. The short term EURUSD technicals are bearish below 1.0730.
USDJPY shrugged off safe haven selling and climbed from an Asian low of 152.98 to 153.94 in early NY. The gains are due to US treasury yields rebounding close to recent peak levels.
AUDUSD found a short term floor overnight and inched up to 0.6493 from 0.6460 after falling to 0.6455 from 0.6547 on Friday. The gains are due to the easing of geopolitical risks.
Canadian Manufacturing and Wholesale Sales reports are due.
