– Hawkish FOMC minutes undermines Loonie
– European and US futures recouping some losses
– US dollar opens on firm footing
USDCAD Snapshot: open 1.2563-67, overnight range-1.2540-1.2570, close 1.2544, WTI open $97.19, Gold open $1,927.77
The Canadian dollar failed to mount a lasting rally and returned to the top of the USDCAD range that contained prices since March 17.
The Canadian dollar suffered alongside free-falling oil prices, which started to slide yesterday and then accelerated following the release of the FOMC minutes. West Texas Intermediate (WTI) plunged to $95.47/barrel from $105.57/b on Tuesday.
The 9.5% slide was precipitated by rising US Treasury yields which threatened global growth and, by default, crude demand. International Energy Agency member countries agreed to release 60.0 million barrels of oil from Strategic Petroleum Reserves, which is over and above the US release of 160 million barrels, previously announced.
The Energy Information Agency (EIA) did its bit and reported that US crude inventories rose 2.4 million barrels in the week ending April 1.
Nevertheless, the oil price drop is overdone as it isn’t enough to replace banned Russian crude shipments.
The FOMC minutes were more hawkish than expected, thanks to references to 0.50% rate increases and talk of a faster pace of balance sheet reduction. The news boosted the US dollar and lowered gold, oil, and equity prices.
The minutes revealed that many members wanted to raise rates 0.50% and that “one or more 0.50%” hikes could be appropriate if inflation remained elevated. The minutes showed the Fed would begin reducing the balance sheet starting in May.
None of the above should have surprised markets. A number of Fed officials made similar comments following the March 16 meeting, including Vice Chair Lael Brainard on Tuesday.
EURUSD dropped to 1.0878 post-FOMC minutes then consolidated erratically in a 1.0866-1.0934 range overnight and is trading at 1.0913 in NY. EURUSD got a bit of a boost from the ECB minutes which suggests policymakers are turning hawkish.
GBPUSD is very choppy in a 1.3064-1.3105 band. UK house price data gave the currency pair a bit of support, but the outlook is bearish below 1.3180.
USDJPY is grinding higher and is trading at the top of its 123.48-123.98 overnight range due to contrasting Fed and BoJ monetary policies.
AUDUSD is on the defensive, trading in a 0.7476-0.7518 band. The currency did not get any lasting support after Westpac Bank predicted the RBA would hike rates in June.
The only US data of note is weekly jobless claims which are expected to be unchanged.