China Manufacturing PMI data was better than expected, both officially and in the Caixin report. NBS PMI for March was 50.5 compared to the forecast of 49.5 and the February result of 49.2. Caixin PMI was 50.8 compared to 49.9 in February. That news sparked a “risk-on” rally in Asia. AUDUSD and NZDUSD popped higher, Asia equity indices soared, US Treasury yields climbed, and commodity prices rose.
European traders were more circumspect. EURUSD and USDJPY retreated from their peak levels, and equity market gains were more subdued. The sting from soft Eurozone PMI data (Actual 47.5 vs forecast 47.6) was eased when the February result was revised higher. Eurozone inflation was soft, rising 1.4% compared to 1.5%, y/y in February.
USDJPY climbed from 110.78 to 111.17 supported by the improved risk sentiment and a jump in 10 year US Treasury yields to 2.44% from 2.414 at Friday’s close.
GBPUSD rallied on the back of better than forecast PMI data (Actual 55.1 vs 52.1 in February) and hopes that politicians will avoid a “no-deal” Brexit. There is speculation that Ms May will make a fourth attempt at convincing MP’s to back her Brexit plan. GBPUSD climbed to 1.3107 from a low of 1.3012.
WTI oil prices climbed to $60.85/barrel overnight and are hovering just below that level in early New York trading. The improved risk sentiment and rumoured progress in the China/US trade talks, combined with ongoing supply issues from Venezuela and Opec production cuts, continue to support prices.
USDCAD consolidated Friday’s post GDP losses in a narrow 1.3341-1.3361 range and is trading with a bearish bias. The far-better-than-expected January GDP rise of 0.3% combined with firm Industrial Product and Raw Materials Prices drove USDCAD below support at 1.3380. Rising oil prices have also undermined the currency pair. Bank of Canada Governor Stephen Poloz is speaking later today. The question is will we parrot dovish economic reservations like the rest of the central banks or deliver a more upbeat assessment of the domestic economy.
US Retail Sales dropped 0.2% in February which was a tad weaker than expected in part due to poor weather during the month. The January results were revised higher. FX markets ignored the data preferring to await ISM Manufacturing PMI (forecast 54.2) later today.
USDCAD Technical Outlook
The intraday USDCAD technicals are bearish while prices are below 1.3380 and looking for a break below 1.3330 to extend losses to the 1.3250 area. A recovery above 1.3380 would negate the immediate downside pressure and suggest 1.3340-1.3460 consolidation. For today, USDCAD support is at 1.3330 and 1.3270. Resistance is at 1.3380 and 1.3420.
Today’s Range 1.3310-1.3410