– S&P 500 rebound sooths sour risk sentiment.
– Eurozone Services PMI data weaker than expected.
– US dollar opens with losses and is down for the week.
USDCAD snapshot 1.3560-64, overnight range 1.3557-1.3599, close 1.3596, WTI $78.07, Gold $1847.30
The Canadian dollar is line-dancing; one step forward, two steps back then repeat. Price action has been confined to a USDCAD 1.3530-1.3665 range since last Friday and there is nothing to suggest things will change today.
Traders hoping that next Wednesday’s Bank of Canada monetary policy meeting could spark a range break-out are likely to be disappointed. In January, the BoC announced that it was pausing rate hikes in order to give the economy a chance to absorb and react to the cumulative 425 bp increase since March 2022. A series of domestic data releases since that meeting reaffirmed the rate hike pause decision.
The US dollar is poised to close with losses against the majors for this week despite intraday volatility stemming from contradictory comments from Fed policymakers.
Risk sentiment soured on Wednesday following comments from Cleveland Fed President Neal Kashkari and Atlanta Fed President Raphael Bostic suggesting that US rates would go higher and stay there longer than previously expected.
Sentiment changed yesterday when Mr Bostic responded to a question about when rate hikes would pause. He said “I would expect that we could be in position by the middle of the summer, late summer. We’ll have to see sort of where things are.” The idea of a a rate hike pause spurred a “risk-on” rally in stocks.
The S&P 500 closed with a small gain and Asian equity indexes followed the Wall Street lead. The Japanese Nikkei 225 index rose 1.56%. European bourses are in the green while S&P 500 futures have gained 27%.
EURUSD drifted in a 1.0597-1.0628 band. Eurozone S&P Global February Services PMI fell from 52.3 to 52 in February. from 52.3 in January. Hawkish comments from ECB officials were ignored.
GBPUSD is near the top of its 1.1947-1.2005 range after better than expected S&P Global Services PMI (actual 53.5 vs 53.3 in January).
USDJPY traded lower in a 136.02-136.76 range, undermined by the US 10-year Treasury yield falling from 4.07% to 4.018% today.
AUDUSD traded in a 0.6728 to 0.6765 band supported by China Caixin Services PMI data (actual 55 vs previous 52.9)
Today’s US data includes the ISM Services PMI index which is expected to be unchanged at 50.5.