– Risk sentiment improves as financial crisis fears fade.
– Canada inflation expected to rise in 0.6% m/m February.
– US dollar slides as stocks rally.
USDCAD snapshot open 1.3666-70, overnight range 1.3659-1.3697, close 1.3664, WTI $68.47, Gold $1969.11
The Canadian dollar is grinding higher as risk sentiment turns positive.
Global markets are back into “risk-seeking” mode after government and banking authorities in Switzerland and the US appear to have extinguished fears of another global banking crisis.
Swiss authorities successfully maneuvered UBS Bank into buying Credit Suisse for more than they wanted to, but far less than the $7.3 billion value on Friday. The furor created after holders of “CoCo” or Contingent Convertible (also known as AT-1) were wiped out while shareholders retained some value was dismissed as a “one-off.” EU and UK banking regulators said that in the event of another bank failure, AT-1 bond holders will not lose anything until shareholders have been wiped out.
Across the Atlantic, JP Morgan Chase CEO Jamie Dimon is leading the charge to keep First Republic Bank afloat. Treasury Secretary Janet Yellen said that the government could backstop deposits if necessary to stop contagion.
The above efforts fueled a rebound in Asian and European equity markets while lifting S&P 500 futures to a 0.82% gain.
The improve sentiment also led to some safe-haven bond trades being unwound. The US 10-year Treasury yield jumped from 3.38% yesterday to 3.55% in NY today.
Canadian dollar traders are awaiting today’s inflation data. February CPI is expected to rise 0.6% m/m (5.4% y/y) while the more important Core-CPI data is expected to fall. Today’s results will not do anything to knock the Bank of Canada off the sidelines, especially because of increasing uncertainty around US regional banks.
EURUSD rallied steadily rising from 1.0705 to 1.0759 in NY, supported by the improved risk tone. Traders completely ignored weak ZEW Survey results from Germany and the Eurozone.
GBPUSD traded in a 1.2231-1.2281 range, underpinned by the positive risk sentiment tone and expectations for the Bank of England to boost rates by 25 bps, Thursday.
USDJPY climbed from 131.04 to 132.43 due to the rebound in the US 10-year Treasury yield. Trading was lighter than usual as Japan was closed for a holiday.
AUDUSD dropped to 0.6673 from 0.6725. Traders were disappointed that the RBA minutes revealed officials would discuss pausing rate hikes at the April meeting.
Today’s US data includes Existing Home Sales and the Redbook index.