– Risk aversion rampant across asset classes
– Global equities drowning in sea of red
– US dollar and safe-havens open higher
USDCAD Snapshot: open 1.2829-33, overnight range 1.2802-1.2892, previous close 1.2893, WTI open $106.72, Gold open $1,830.34
The Canadian dollar sank and soared in choppy trading sessions yesterday and overnight. Domestic data played a brief role yesterday when Canada’s April inflation data was released.
CPI rose 6.8% y/y, which was higher than forecast. Statistics Canada wrote, “the year-over-year increase in April was largely driven by food and shelter prices. Gas prices increased at a slower pace in April compared with March, moderating the acceleration of the all-items Consumer Price Index (CPI) in April. Excluding gasoline, the CPI rose 5.8% y/y in April, after a 5.5% gain in March. This was the fastest pace since the introduction of the all-items excluding gasoline special aggregate in 1999.”
The latest surge in gas prices suggest the May results may be even higher.
The Canadian dollar rallied on the news, but the gains were erased quickly when Wall Street stocks started falling. The fall became a rout and when the dust cleared at the end of the day, the Dow Jones Industrial Average had lost over 1,000 points while the S&P 500 index plunged 4.04%.
Asia and European bourses followed suit, swamped by a wave of risk aversion that fueled safe-haven demand for Japanese yen and Swiss francs, while taking gold prices off their recent low.
The commodity currency bloc outperforms after a wild up and own overnight session. AUDUSD traded erratically in a 0.6954-0.7022 range following better than expected unemployment data which opened the door to more aggressive rate hikes from the RBA.
The Canadian dollar mirrored the AUDUSD price action. USDCAD is trading just above yesterday’s low on the heels of sharply rising S&P 500 futures which have recouped almost half of their overnight losses.
The Canadian dollar did not react to news that Alberta Premier Jason Kenny rosined after garnering just 51.2% of the vote in a leadership review.
EURUSD, GBPUSD, and USDJPY were choppy but rangebound and all awaiting direction from US markets.
USDCAD direction is at the mercy of risk sentiment as measured by S&P 500 price swings. The index fell 4.0% yesterday, suggesting it is ripe for a bounce, even a dead-cat one, which, at best, will leave USDCAD stuck in its recent range.
Philadelphia Fed manufacturing PMI and weekly jobless claims are ahead.
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