– Dovish Fed speak helps lift stocks.
– Data void leaves FX rangebound
– USD opens mixed after uneventful overnight session.
USDCAD: open 1.3469-73, overnight range 1.3448-1.3482, close 1.3464, WTI $74.42, Gold, $2036.05
The Canadian dollar is bouncing inside a narrow range after a dull overnight session, partly due to the major Asian markets getting ready for Lunar New Year celebrations. The Loonie could get an added lift on Friday’s if the Canadian unemployment reports comes out far stronger than expected. Currently, analysts are expecting a gains of 15,000 (December was flat) with the unemployment rate ticking up to 5.9% from 5.8%. Those numbers would create a stir, but substantially higher job gains and a lower unemployment rate would see USDCAD testing support in the 1.3350 area.
Policymakers at the major central banks are urging caution and pushing back against market anticipation of steep interest rate cuts in 2024. Fed Powell reiterated his cautious outlook in a 60 Minutes interview which was taped prior to Friday’s blow-out nonfarm payrolls report. Stronger than expected ISM Services underscored the need for caution.
A host of Fed officials have been preaching a similar outlook this week. Fed Governor (and voter) Adrian Kugler spoke to the Brookings Institution yesterday. She seems to agree with Mr Powell. Ms. Kugler pointed out that the Summary of Economic Projections suggested that rates have peaked but she did not give any indications when rate would be cut. She said “At some point, the continued cooling of inflation and labor markets may make it appropriate to reduce the target range for the federal funds rate.”
Wall Street has fully embraced the notion that 2024 is the year of rate cuts, and they do not seem to be too worried about the timing which explains why the S&P 500 index closed at 4995.06 which is within spitting distance of the psychologically important 5000 level.
EURUSD see-sawed in a 1.0768-1.0789 band, garnering a modicum of support from some hawkish comments by ECB officials that push back against speculation of a 25 bp rate cut at the April meeting.
GBPUSD is quietly bid in a 1.2613-1.2639 range due to a spate of recent economic reports that suggest the UK economy is on the mend. Housing prices, services activity, business confidence and retail sales have been stronger than expected.
USDJPY is bid. Prices are at the top of its147.93-149.27 range due to remarks from BoJ Deputy Governor Shinichi Uchida who suggested just one rate hike (to 0.10%) would be all that is needed.
AUDUSD drifted in a 0.6505-0.6532 range with gains limited by Chinese economic growth woes which were highlighted by disappointing January CPI (actual.8%) and Producer Prices (2.5% y/y) data.
The Canadian data calendar is empty.
.