– Canada budget non-event for FX
– Hawkish Fed comments boost Treasury yields
– US dollar opens with gains across the board
USDCAD Snapshot: open 1.2591-95, overnight range 1.2578-97, close 1.2592, WTI open $96.83, Gold open $1,932.34
The Canadian dollar is on the defensive. Yesterday’s round of hawkish comments from Fed officials drove US Treasury yields higher and sparked broad-based demand for US dollars.
St Louis Fed President James Bullard accusing the Fed of being “behind the curve and said the fed funds rate needs to be 3.5% by year end. That is about 0.75%-1.0% higher than the dot-plot forecasts. Chicago Fed President Charles Evans sort of agreed, saying US rates should be “neutral” by year-end. Unfortunately, there is not a clear picture of what is the “neutral rate. Still, the comments lifted the US 10-year Treasury yield from yesterday’s low of 2.563% to 2.689% today.
The Jagmeet Trudeau coalition delivered the new budget yesterday. It includes tens of billions of new spending, with a side of “tax the rich.” What it doesn’t do is reduce spending. USDCAD traders ignored the news.
USDCAD saw a bit of support from falling WTI oil prices, which dropped from $98.75/barrel yesterday to $95.33/b in Asia, before climbing to $96.56/b in NY. The ongoing COVID crisis in China is raising fears of reduced crude demand.
The monthly Labour Force Survey is released today. Canada is expected to have gained 80,000 jobs in March. It is a far cry from the February gain of 336,600, however the data from both reports is skewed by the impact of Omicron measures. No matter the result, the BoC will still hike rates 0.50% next week.
Asian equity indexes closed with modest gains and the German Dax index is leading European bourses higher.
European traders have ignored reports that Russia bombed a Ukraine railway station and news EU added coal to its list of Russia sanctions. DJIA and S&P 500 futures are a tad higher while gold is close to unchanged at $1933.00.
EURUSD remains on the defensive, trading in a 1.0849-1.0891 range overnight. Traders ignored a survey of economists that predicts the ECB will raise rates as early as September. However, US rates hikes will be far more aggressive ad combined with EU recession fears from the Russia/Ukraine war, leaves EURUSD gains capped.
GBPUSD is trading at the bottom of its 1.3028-1.3085 range, weighed down by broad US dollar strength.
USDJPY continues to eye major resistance in the 125.00 area. The latest jump in US Treasury yields lifted the currency pair from 123.68 to 124.22, where it sits in NY.
AUDUSD dropped to 0.7458 from 0.7491 on the back of broad US dollar strength. Traders ignored a comment from the RBA Financial Strategic Review warning borrowers to prepare for higher rates.
There are no to-tier US economic reports today.