– Hawkish Powell sends Treasury yields soaring
– Oil prices rise on supply concerns
– US dollar opens on mixed note-JPY sharply lower
USDCAD Snapshot: open 1.2611-15, overnight range-1.2573-1.2622, close 1.2593, WTI open $112.54, Gold open $1,925.09
The Canadian dollar saw a lot of up and down movement overnight but remained inside yesterday’s trading band.
The Canadian dollar continues to be an “after-thought” in global FX trading. Traders ignore domestic issues, and data with the currency direction driven by both oil price and S&P 500 price action. That was evident in Asia as USDCAD rallied in the face of slumping S&P 500 futures, then retreated when futures recovered.
West Texas Intermediate (WTI) churned as EU leaders debated a full Russian oil embargo. WTI climbed to $115.05/b from $109.47/b on fears that an embargo would cause oil shortages around the globe.
Germany is opposed to banning Russian crude shipments because it would cause serious harm to the EU economy, particularly theirs. WTI prices got an added lift from Fed Chair Powell’s hawkish comments which boosted the US dollar.
Jerome Powell has completed his transformation from stubborn inflation dove to rabid inflation hawk. Yesterday, he said that the Fed’s inflation outlook has deteriorated sharply, and it may become appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so. And if we determine that we need to tighten beyond common measures of neutral and into a more restrictive stance, we will do that as well.
The 10-year US Treasury yield soared on the news, rising from 2.19% yesterday to 2.35% in NY today. Powell’s comments also led Goldman Sachs economists to predict a 0.50% rate hike at the May and June FOMC meetings.
EURUSD traded with a negative bias in a 1.0962-1.1025 range and sits at 1.1000 in NY trading. Comments from President Biden’s warning about Russia’s chemical weapon plans, the humanitarian crisis from Ukrainian refugees and the hawkish Powell comments weigh on prices.
GBPUSD is trading at the top of its 1.3122-1.3220 overnight range powered by EURGBP selling. GBPUSD is also supported by hopes that Chancellor Rishi Sunak will announce some stimulus spending in Wednesday’s Spring Statement.
USDJPY blasted higher in the wake of soaring Treasury yields after Powell’s hawkish interest rate warnings. The gains were exacerbated by the recent dovish comments from BoJ officials suggesting the need for ongoing stimulus.
There are no top-tier Canadian or US economic reports today.