– FOMC meeting ahead-expect 0.50% rate hike
– ECB official talks of need to raise rates in July
– US dollar opens modestly lower except against CHF and GBP
USDCAD Snapshot: open 1.2806-10, overnight range 1.2806-1.2841, previous close 1.2841, WTI open $106.10, Gold open $1,869.85
The Canadian dollar seems to have found its footing. USDCAD flirted with major resistance a in the 1.2900 area yesterday which held. A surge in oil prices, a dip in the US 10-year Treasury yield, and a minor stock market rally on Wall Street drove prices down to 1.2840 by the end of the day and then down to 1.2806 in early NY trading today.
Yesterday Bank of Canada Senior Deputy Governor Carolyn Rogers reminded traders that domestic interest rates were going to go sharply higher. She explained that the April 13 rate hike was in response was in response to inflation running near 7.0%. She warned of further rate hikes saying, “with the Canadian economy starting to overheat, we can’t let demand get too far ahead of supply or we risk adding further to inflation.”
The Canadian dollar got an added boost from the surge in West Texas oil prices. WTI climbed from $101.25/barrel on Monday to $106.96/b in NY today following reports that the EU plans a total embargo of Russian oil and gas by year end.
EU President Ursula von der Leyen said “ There will be a complete import ban on all Russian oil; seaborne, pipeline, crude and refined. Crude purchases will be halted within six month while refined fuel purchases will stop by year end.
ECB policymaker Isabel Schnabel said that Eurozone interest rates need to rise, predicting a 0.25% hike in July. She said “Talking is no longer enough, we need to act. From today’s perspective, a rate increase in July is possible in my view.”
EURUSD eked out a small gain on the news, rising to 1.0535 from 1.0507. However, recession concerns due to the fall-out from Russia’s invasion of Ukraine and other supply chain issues limited gains.
GBPUSD rallied from 1.2468 to 1.2523 on the back of report claiming that 6 out of nine Bank of England policymakers want to raise UK rates by 0.50% at tomorrow’s meeting. It may not be so cut and dried as the UK economy is already slowing due to geopolitical issues and supply chain disruptions.
AUDUSD climbed to 0.7135 in NY from 0.7090 in Asia. Prices were supported by higher than expected March retail sales data and predictions that the RBA will raise rates in June and July.
Today’s US data includes ISM Services PMI and ADP employment.