– WTI oil jumps 5.8% since yesterday
– EURUSD soars on ECB hawkish flip
– US dollar opens mixed; EUR outperforms
USDCAD Snapshot: Open 1.2722-26, Overnight Range-1.2665-1.2732, previous close 1.2675, WTI open $91.62, Gold open $1813.38
The Canadian dollar drifted modestly higher in Asia after Amazon’s earnings gave badly-beaten equity traders a bit of hope.
Wall Street closed on an ugly note after Meta’s (formerly Facebook) disappointing guidance, and Fed rate hike fears drove the Nasdaq down 3.74%. The S&P 500 lost 2.44%, and the Dow Jones Industrial Average shed 1.45%. However, the 11.0% jump in Amazon stock boosted Asian equity sentiment, and Hong Kong Hang Seng, Japan’s Nikkei 225, and Australia’s ASX 200 posted gains.
European equity traders started the day in a bad mood, and the major bourses are deep in the red, except for the UK FTSE 100, which is nearly unchanged due to the lingering impact from the ECB monetary policy meeting.
The ECB statement was unchanged from December and reinforced their dovish bias. But it was not very accurate. President Christine Lagarde told a very different story during her press conference, alluding to concern about inflation which fueled speculation for rate increases in 2022.
EURUSD traders scrambled to unwind short positions and drove the currency to 1.1484 NY today, from the pre-ECB press conference low of 1.1268. Ms Lagarde said that inflation risks were to the upside, and she failed to deny that a rate hike was possible this year. She also suggested that an updated monetary policy outlook would be available at the March meeting.
Across the English Channel, the Bank of England (BoE) appeared to be even more hawkish than the ECB. The BoE hiked interest rates by 0.25% which was expected but four of the nine Monetary Policy Committee members want to raise rates 0.50%. GBPUSD rallied rising from 1.340 to 1.3627 but could not hang onto the gains. Prime Minister Boris Johnson’s political problems and renewed Brexit tensions weighed on prices.
The Canadian dollar is not getting much benefit from the 5.8% jump in West Texas Intermediate prices since yesterday. Instead, prices are weighed down by negative risk sentiment due to plunging stock prices on Wall Street.
It’s nonfarm payrolls day in the US. The consensus forecast is for a gain of 150,000 jobs in January, but after the nasty ADP result on Wednesday, the result may be far lower than expected. Even so, the data is yesterday’s news. The Fed is focused on inflation, and the key data is average hourly earnings (forecast 5.2% compared to 4.7 % in December.
The Canadian employment report is expected to show a loss of 117,500 jobs in January due to the omicron outbreak. The forecasts are all over the map. Fortunately, this report doesn’t matter as the
BoC is focused on inflation and has indicated the first rate hike is in March. Today’s data will be long forgotten by then.