- Global central banks are leaning hawkish
- Trumps war on Iran will limit US dollar losses
- The US dollar is consolidating this week’s gains
USDCAD open: 1.3723, overnight range 1.3713-1.3743, close 1.3740, WTI 96.10, Gold 4667.89
The Canadian dollar drifted lower overnight partly because of steady to firm oil prices and it has posted gains against all the major currencies this week, including the US dollar.
That strength, however, hides a softening domestic backdrop. Unemployment is edging higher, and Trump’s tariff war is adding to the strain.
WTI crude is holding within a 92.48–96.40 band and is trading near 94.93 in New York as some traders are betting that the latest US attempt to reopen the Strait of Hormuz will gain traction. Saudi Arabia has warned that oil could climb to $180.00/b if the Strait remains blocked into late April.
Six of seven G-7 central banks are now leaning hawkish, worried that higher energy prices and supply disruptions will bleed into inflation. The RBA has already pulled the trigger with a 25 bp hike. The Fed leaned in that direction as well, even if it still has one rate cut pencilled in for 2026.
Gold has lost its shine as inflation fears crowd out safe-haven demand. The oil shock from Operation Epic Fury has pushed the US 10-year yield up to 4.30% from 4.13% earlier in the week. On fears that central banks will raise rates. Gold has dropped 8.25% this week.
Equity markets are feeling the strain. Asia closed heavy, with Topix down 2.91%, Hang Seng off 0.88%, and ASX 200 lower by 0.82%.
As of 7:00 am, Europe are trading poorly. The DAX is down 0.52%, FTSE 100 off 0.23%, and CAC 40 has dropped 0.28%. S&P 500 futures have lost 0.52%, the 10-year Treasury yield is 4.297%,and the the DXY at 99.48.
EURUSD traded in a 1.1539-1.1595 range overnight, slipping toward the lower end in early New York. Lagarde flagged upside inflation risks, sparking short covering that drove the pair from 1.1443 to 1.1619. German PPI disappointed at -0.5% m/m and -3.3% y/y versus forecasts of 0.3% and -2.7%.
GBPUSD traded in a 1.3364-1.3443 range and is pressing session lows after peaking at 1.3465 on the back of a hawkish BoE outcome. The 9-0 hold masked a clear shift in tone, with even the usual doves acknowledging the case for higher rates.
USDJPY traded in a 157.64-158.90 band, clawing back part of the sharp drop from 159.89 to 157.52. Intervention chatter near 160.00 and shifting expectations around Japan policy weighed previously. Today’s bounce reflects pre-weekend caution and concerns that elevated oil prices will hit growth.
AUDUSD traded in a 0.7053-0.7098 range, consolidating recent gains as the US dollar softens slightly. The broader backdrop reflects a more hawkish G-7 stance outside the Fed.
Canada releases Retail Sales, the New Housing Price Index, and the Industrial Product Price Index.
