- Oil prices drop and risk sentiment improves.
- Traders are optimistic for a second round of US/Iran peace talks.
- The US dollar drops across the board.
USDCAD open: 1.3763, overnight range 1.3760-1.3794, close 1.3794, WTI 96.86, Gold 4780.39
The Canadian dollar rallied on improving global risk sentiment and due to widespread selling of the greenback. One week into the Iran-US ceasefire, global traders are acting like the all-clear has been sounded. That’s because of reports that a second round of Iran and US peace talks may begin as soon as Thursday. Equities are bid, the US dollar is on the back foot, and oil has backed off its highs
Prime Minister Mark Carney now has a majority government after Liberal candidates swept three by-elections, bringing the party’s total to 174 seats.
WTI traded in a 95.25-98.00 range and was last seen at 97.73 in New York. The International Energy Agency sharply revised its demand outlook, now projecting growth to slow by 80,000 bpd this year, a stark shift from its March forecast of a 640,000-bpd increase. The escalation of conflict in the Middle East is being cited as the primary driver behind the downgrade.
Meanwhile, traffic through the Strait of Hormuz is picking up. Monitoring data show 31 ships transited in the past 24 hours, with another 15 currently moving through, reinforcing the view that the worst-case energy disruption is off the table, at least for now.
Asian equity markets closed higher, led by a 0.87% gain in Japan’s Topix. Australia’s ASX 200 rose 0.50% and Hong Kong’s Hang Seng added 0.82%.
As of 7:30 am. Germany’s DAX is up 0.97%, France’s CAC 40 has gained 0.61%, while the UK FTSE 100 is flat. S&P 500 futures are up 0.21%, the US 10-year yield is 4.291%, and the DXY sits at 98.03.
EURUSD traded in a 1.1756-1.1802 range and is holding near the top of that band in early New York trade, supported by improved risk appetite and easing oil concerns. ECB President Lagarde is due to speak at the IMF meetings at 5:00 pm. German wholesale prices rose 2.7% y/y in March, well above the 0.4% forecast.
GBPUSD traded in a 1.3500-1.3573 range and pushed higher as the relief rally triggered a paring of long US dollar positions. Bank of England Governor Andrew Bailey, along with MPC members Catherine Mann and Megan Greene, are all scheduled to speak at the IMF meetings.
USDJPY traded in a 158.76-159.46 range and drifted lower on the combination of softer oil prices and broad US dollar weakness. BoJ Governor Ueda cited Middle East uncertainty as a reason to dial back expectations for a rate hike at month-end, noting the need to monitor the impact on growth, inflation, and financial conditions.
AUDUSD traded in a 0.7077-0.7128 range and extended gains as lower crude prices improved global risk sentiment. News that China is accepting BHP iron ore shipments added support. The National Australia Bank Business Conditions Index was unchanged at 6, while Business Confidence collapsed to -29 from 0.
A number of Federal Reserve policymakers are scheduled to speak today, which could provide further direction for rates and the US dollar.
US Producer Prices ex food and energy are expected to rise 4.2% y/y in March, up from 3.9% previously. The Canadian economic calendar is empty.
