– FX idles despite rising equity markets
– BoE and ECB meetings tomorrow
– Canadian dollar slips as commodity currencies gain
USDCAD Snapshot: Open 1.2682-86, Overnight Range-1.2677-1.2697, previous close 1.2685, WTI open $88.49, Gold open $1802.86
The Canadian dollar failed to get any traction after news that Canada’s economy grew faster than expected in November. Canada GDP rose 0.8% m/m, trumping the 0.3% m/m forecast. Statistics Canada predicts that the real GDP for December was essentially unchanged, indicating Q4 GDP grew 1.6% q/q.
The results indicate that the domestic economy was well-placed to withstand the negative impact on growth from the Omicron outbreak in December. That news combined with the outlook for at least five Bank of Canada rates hikes in 2022, should have sent the Canadian dollar soaring.
It didn’t. Instead, the Canadian dollar languished in a 1.2670-1.2727 range yesterday and into early NY trading today.
The Canadian dollar is seeing much support from oil prices. West Texas Intermediate (WTI) climbed to $88.75 yesterday after the American Petroleum Institute (API) said crude inventories fell 1.645 million barrels in the week ending January 28. Opec meets today and traders are discounting suggestions the cartel will increase March production above the 400,000 b/day already planned.
The Chinese New Year celebrations are in full swing which greatly reduced trading activity in Asia. Japan’s Nikkei 225 and Australia’s ASX 200 indexes closed with decent gains, and European bourses are in positive territory as well. S&P 500 and DJIA futures point to a positive open on Walls Street.
EURUSD is trading at the top of its overnight 1.1268-1.1328 range after a hotter than expected Eurozone inflation print. EU CPI rose 5.1% y/y in January, compared to the forecast for a 4.4% y/y increase.
Cores CPI dropped to 2.3% y/y from 2.6% y/y in December, but it was higher than forecast. EURUSD bulls were encouraged by the results, with many believing that the European Central Bank (ECB) will adopt a hawkish interest rate outlook at Thursday’s meeting.
GBPUSD followed EURUSD higher. The Bank of England (BoE) is widely expected to raise interest rates 0.25%, with another five hikes before year end. However, BoE officials have not indicated they agree with the hawkish outlook.
AUDUSD was the best performing G-10 currency against the US dollar overnight, despite a somewhat dovish RBA outcome on Monday. AUDUSD rallied from a post-RBA low of 0.7130 to 0.7155 in NY. That may be due to ambiguous remarks by RBA Governor Philip Lowe. He said “If things go well, and the economy performs strongly, then there are clearly scenarios where we would be increasing rates later this year if some of the uncertainties are resolved.”
US ADP employment data is ahead.