LUSDCAD soared, rising from 1.3130 to 1.3220 after Q4 GDP rose a mere 0.4% rather than 1.2%, q/q that was expected. Making matters worse, Statistics Canada released the report five minutes earlier than its scheduled release. Eagle-eyed traders got the jump on their slower compatriots. However, the reaction may be overdone. The steep drop in oil prices was in Q4 was expected to have a negative impact on growth. The oil price rally since the beginning of the year, suggests that Q4 weakness will be reversed in coming months. Nevertheless, the data gives the Bank of Canada all the ammunition it needs to leave policy unchanged at the March 6 meeting.
In Asia, March roared in like a lion. The new month started with equity traders in Asia and Europe buying stocks. China’s Shanghai Shenzhen 300 Index soared 2.19%, and the Nikkei rose 1.02%. The CSI 300 got an added boost thanks to MSCI kicking off the first of three weighting increases of Chinese companies in their benchmark indices. The positive sentiment was supported by the US delaying a tariff increase on Chinese imports that was scheduled for March 1 and by dovish global central banks.
WTI prices are underpinned by a report that China will be importing its first cargo of US crude, in three months. Opec production cuts and a 40% drop in Venezuela oil exports are also keeping upside pressure on prices.
Better than expected Eurozone February PMI data (Actual 49.3 vs forecast 49.2) and upwardly revised January results put a floor under EURUSD at 1.3154. Prices have extended gains above their NY opening levels and are trading at 1.1384. However, the single currency remains rangebound in a 1.1300-1.1450 range.
GBPUSD rose from 1.3050 to 1.3345 this week, supported by diminished “no-deal” Brexit risks and month-end portfolio demand for Sterling. Profit taking ahead of the weekend and uninspiring UK Manufacturing PMI data led to price consolidation in a 1.3220-64 range overnight. GBPUSD is trading in the middle of that band in New York trading this morning.
USDJPY soared alongside rising US Treasury yields, supported by Thursday’s US GDP data. Prices climbed from 111.33 to 111.96 where it is trading in New York. AUDUSD and NZDUSD rose following better than expected Caixin Manufacturing PMI data. (Actual 49.9 vs forecast 48.5 and January’s 48.3)
This morning’s US Personal Income/Consumption data did not have much impact on FX markets. Traders are looking ahead to ISM Manufacturing PMI later this morning.
The intraday USDCAD technicals are bullish while prices are above 1.3150, looking for a break of resistance in the 1.3180 area to extend gains to 1.3230. A move below 1.3150 targets 1.3080. Longer term, USDCAD needs to break above 1.3260 to refocus on 1.3370. While prices are below 1.3220, prices are targeting 1.3110 and then 1.3060. Today’s Range 1.3110-1.3180