March 28, 2024
- Canada GDP rises 0.6% in January (Forecast 0.4% m/m).
- Weekly Jobless claims 210k (forecast 215k, last week 212k)
- US dollar trades starts to reverse overnight gains.
FX at a Glance
Source: IFXA/RP
USDCAD Snapshot: open 1.3611-15, overnight range 1.3566-1.3614, close 1.3567
USDCAD inched higher overnight, driven by broad US dollar strength and somewhat hawkish comments by Fed Governor Christopher Waller. His comments suggest that there was no hurry to cut rates were not anything new. The FOMC SEP suggested a similar stance.
USDCAD may also have been boosted by the lack of month-end, quarter-end portfolio rebalancing USDCAD sales. Normally, when the S&P rises substantially, portfolio managers need to sell US dollars to rebalance the portfolios. Perhaps the flows are delayed until after the Easter break.
USDCAD is also supported by widening CAD/US interest rate differentials. The BoC is expected to cut rates in June or July, while the Fed may not cut until September at the earliest.
Canada’s economy was a tad more robust than expected growing at 0.6% m/m in January compared to the forecast of 0.4% and 0 growth in December. If the results are legitimate and not because of one-off effects, the BoC may been in less of a hurry to cut interest rates, which is why USDCAD has slipped from pre-data level of 1.3595 to 1.3580.
Canadian markets are closed tomorrow.
USD/CAD Technicals
The intraday USDCAD technicals are bullish but need to break above 1.3620 or risk retesting support in the 1.3540 area.
The weekly USDCAD chart paints a bullish picture. The uptrend line from January 1 is intact while prices are above 1.3470 and is looking for a decisive break above the resistance area between 1.3630 and 1.3670. If it occurs, a retest of 1.3900 is likely. On the other hand, a move below 1.3470 suggests further 1.3340-1.3640 range trading.
For today, USDCAD support is at 1.3540 and 1.3510. Resistance is at 1.3620 and 1.3650. Today’s range is 1.3540-1.3620.
Chart: USDCAD weekly
Source: DailyFX
No White Rabbits Here
Fans of Lewis Carroll’s “Alice in Wonderland” know that the White Rabbit feared being late. Central Bankers have adopted the opposite tack. Yesterday, Fed Governor Christopher Waller said, “There is no rush to cut the policy rate.” Bank of England policymakers are offering similar sentiments. Catherine Mann and Jonathan Haskell believe that markets are too complacent about how long UK rates will remain unchanged.
The US dollar inched higher on Mr. Waller’s comments and because anticipated month-end US dollar selling to rebalance portfolios was less than expected.
FX liquidity was lighter than usual due to Holy Thursday (Maundy Thursday) holidays in Scandinavia, Portugal, Spain, and a host of other countries.
The US data showed the economy growing at 3.4% (forecast 3.2%) and weekly jobless claims steady at 210,000. The news flipped S&P 500 futures from negative to positive, mainly because traders believe the Fed is really motivated to cut rates and today’s data won’t change their minds.
Global Equity Roundup
Asian equity indexes were mixed. Japan’s Nikkei 225 index fell 1.46% while Australia’s ASX 200 gained 0.99%. Hong Kong’s Hang Seng index rose 0.91%. European bourses opened positively and have inched higher led by a 0.22% rise in the UK FTSE 100 index. S&P 500 futures are slightly higher. Gold rose to $2,216.69 while the US 10-year Treasury yield sits at 4.22%.
EURUSD
EURUSD traded lower, falling from 1.0828 to 1.0775 as some day traders were caught wrong-footed when month-end EURUSD selling was less than expected, and by Fed Governor Waller’s somewhat hawkish comments. Waller’s remark helped to widen EUR and US interest rate differentials which also weighed on the currency.
GBPUSD
GBPUSD traded in a 1.2586-1.26411 range and is sitting at 1.2610 in NY. Steady Fed rates combined with expectations that the BoE will cut rates in May or June are undermining GBPUSD, although the Mann/Haskell comments tempered the selling.
USDJPY
USDJPY was steady in a 151.25-151.55 range. The BoJ is eager to intervene but would prefer not to enrich speculators who are well short USDJPY. That suggests USDJPY could rise a lot higher in order to force speculators to capitulate.
AUDUSD and NZDUSD
AUDUSD is having a bad day. It fell from 0.6541 to 0.6485 in the wake of disappointing retail sales data (actual 0.3% m/m, forecast 0.4%, January 1.1%) and softer inflation data (Consumer inflation expectations actual 4.3% vs February 4.5%). Reportedly, Taylor Swift concerts accounted for 0.2% of the 0.3% increase in Retail Sales.
NZDUSD tracked AUDUSD lower, trading in a 0.5965-0.6006 range. Negative sentiment was exacerbated after ANZ Business Confidence data fell 12 points to 23.
USDMXN
USDMXN dropped to 16.5325 from 16.6078, before rebounding to 16.5742 in NY. Mexican markets are closed today and Friday for Easter. USDMXN downside is fueled by the hawkish rate cut delivered by Banxico last week.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: 7.0948 vs exp. 7.2259 (prev. 7.0946).
Shanghai Shenzhen CSI 300 rose 0.52ll n% to 3520.96 .
Chart: USDCNY and USDCNH 4 hour
Source: Investing.com
