– Commodity bloc currencies are in demand
– Improved risk sentiment bolsters equities
– US dollar opens with losses against G-10 majors, GBP unchanged
USDCAD Snapshot: open 1.2540-44, overnight range-1.2519-1.2552, close 1.2527, WTI open $110.66, Gold open $1,956.01
The Canadian dollar continued to grind out gains overnight. Global risk sentiment improved modestly after the Biden, EU, NATO meetings did not elevate Russia tensions further.
President Biden announced a plan that calls for the US to ship 15 billion cubic meters of Liquid Natural Gas (LNG) to Europe this year. It’s a great idea on paper, but it falls short.
For starters, Europe imports 380 million cubic meters of Russian gas every day. Fifteen billion cubic meters is only 40 days supply, and to even accomplish that goal, the US needs to build LNG terminals. Currently, the US does not have the capacity to export more gas.
West Texas Intermediate (WTI) traded narrowly in a $109.19-$112.76 band, partly due to caution ahead of the weekend.
The Russia/Ukraine war pushed COVID out of the headlines by the virus continues to wreak havoc in different regions around the world. China reported close to 5,000 COVID cases, and South Korea is averaging 357,000 new cases/week.
Global risk sentiment is positive, and it is underpinning the Canadian dollar. Many investors believe the outlook for a series of US rate hikes, lifting the fed funds rate to the 2.50% area by the end of 2023, is fully reflected in current prices. That helps to explain why the US 10-year yield traded sideways in a 2.34-2.37% range.
Asian equity indexes closed on a mixed note, with Australia’s ASX 200 and Japan’s Nikkei 225 index marginally higher, while COVID fears undermined the Chinese indexes. European bourses turned opening losses to small gains, and S&P 500 futures suggest a positive open on Wall Street.
EURUSD traded in a 1.0996-1.1037 range and is in a modest uptrend while prices are above 1.1000.
The German IFO survey was sharply weaker than last month due to the war in Ukraine, and traders ignored the news.
GBPUSD chopped around in a 1.3161-1.3224 range, peaking in Asia, and bottoming out in Europe. UK Retail Sales fell 0.3% m/m in February compared to forecasts for a 0.6% rise. The intraday GBPUSD technicals are bullish above 1.3150.
USDJPY traded choppily in a 121.19-122.43 range in Asia with price action tracking US Treasury yields. Gains may be limited ahead of positioning for Japan’s fiscal year end, March 31.
AUDUSD and NZDUSD underpinned by positive risk sentiment and elevated commodity prices.
The Michigan Consumer Sentiment index is expected to be unchanged at 59.7.