- WTI soars in Asia, then retreats in Europe
- Global equity markets awash in red ink.
- The US dollar gains on safe haven demand
USDCAD open: 1.3529, overnight range 1.3546-1.3607, close 1.3568, WTI 101.09, Gold 5108.12
The Canadian dollar traded with a firm tone and is the top-performing G-10 currency overnight, once again riding the tailwinds from the surge in crude prices.
WTI traded in a dramatic move from Friday’s low of 85.94 to an Asian session peak of 116.63/barrel before retreating sharply to 99.32 by the New York open today. The volatility reflects growing anxiety about the stability of global oil supply.
Energy traders are increasingly worried about a supply shortfall. Iraq’s crude production has reportedly fallen by roughly 60%, while both Kuwait and the UAE announced production cuts because the Strait of Hormuz is effectively closed and storage capacity is nearing its limits. The more hopeful forecasts assume the disruption will last only a week or two, but some analysts at Deutsche Bank warn that a prolonged closure could push Brent crude toward the 200/b level.
Asian equity markets dropped sharply led by a 3.80% decline in Japan’s Topix. Australia’s ASX 200 fell 2.85% and the Hong Kong Hang Seng dropped by 1.35%.
As of 7:45am, the French CAC 40 has dropped 1.93%, the German DAX has fallen by 1.57% and the the UK FTSE 100 is down 1.20%. S&P 500 futures have slipped 1.12% and the 10-year Treasury yield is 4.168%.
EURUSD traded in a 1.1507–1.1573 range due to fears about an inflation surge from higher crude prices. Reports that the G-7 is considering releasing oil from strategic reserves helped prices recover from the session low. Germany’s industrial production slipped 0.5% m/m in January and Eurozone Investor Confidence dropped to -3.1 from the previous 4.2 reading.
GBPUSD traded in a 1.3283–1.3413 range and remained under pressure throughout the session. The pair also opened with a downside gap in Asia and was hovering near 1.3355 by the New York open. Sterling was not helped by renewed political theatrics after Donald Trump mocked UK Prime Minister Keir Starmer for wanting to “join a war after we’ve already won.”
USDJPY rose in a 158.30–158.70 range mainly due to the spike in oil prices, which worsens the country’s energy import bill. Japan’s trade minister is lobbying Washington to exempt Japan from the proposed tariff increase.
AUDUSD bounced in a 0.6956–0.7033 range and recovered from its early session lows. The Australian dollar firmed as the session progressed and is pressing near the upper end of the band. Support came from stronger Chinese inflation data and speculation that the Reserve Bank of Australia may still have to consider additional rate tightening.
