- US imposes “Sanctions-Lite” on Russia, equities rally
- RBNZ hikes 0.25%, issues hawkish guidance
- US dollar retreats following tepid response to Russian actions
FX at a Glance 24 hours
Source: IFXA Ltd/RP
USDCAD Snapshot: open 1.2706-10, overnight range-1.2685-1.2769 Fri. close 1.2770
USDCAD dropped on the back of broad based US dollar selling pressure following the announcement of US sanctions on Russia which were viewed as “tepid.” Prices broke below the overnight low of 1.2708 in NY and dropped to 1.2684, in tandem with a rising S&P 500 index.
The drop occurred despite a 5.3% plunge in WTI oil prices from $95.80/barrel yesterday to $90.68 overnight.
USDCAD remains rangebound with direction driven by external factors, S&P 500 moves, and oil price swings. Arguably, Canada’s vast supply of oil and other resources, and its distance from the Ukraine, suggests that in the event of an escalation of hostilities in Eastern Europe, the Canadian dollar will be seen as a safe-haven currency, which would limit USDCAD gains.
The Canadian economic calendar is empty.
Technical view: The intraday technicals are modestly bearish while trading below 1.2750 looking for a break below 1.2670 to extend losses to 1.2640, and then 1.2550. A failure to break to the downside shifts the focus back to 1.2750 and 1.2800.
For today, USDCAD support is at 1.2670 and 1.2640. Resistance is at 1.2750 and 1.2810. Today’s Range 1.2670-1.2750
Chart USDCAD and S&P 500 daily
Source: Saxo Bank
G-10 FX recap and outlook
Canadian comedian Russell Peters made a fortune talking about his dad threatening him with “someone’s gonna get a hurt real bad.” The audience laughed and no blood was shed. That pretty much sums up the impact the latest US sanctions on Russia had on financial markets.
President Biden appears to have over-promised and under-delivered. He was full of bluster and bombast as Russia massed troops along Ukraine’s eastern border and markets turned risk-averse. The S&P 500 dropped over 10% since the beginning of the year. Then Putin made his move and now two “separatist “regions of Ukraine are effectively part of Russia.
Russia’s move led Biden to sanction two Russian banks and a trio of closely allied Putin cronies. Canada’s Justin Trudeau jumped on the sanction bandwagon. However, the former drama teacher seemed confused because his sanctions appeared to be aimed at Canadians.
He said he would ban Canadians from buying Russian sovereign debt, ban Canadians from financial dealings with two Russian banks while banning Canadians from “all financial dealings” with the independent states of Luhansk and Donetsk, which also implies Canada recognizes those two regions as independent states.
Missing from all the sanctions and bans was any mention of Vladimir Putin.
Global equities rallied on the news. The major Asia indexes finished with gains except Japan’s which were closed for the Emperor’s Birthday. European bourses are higher with the French CAC index up 1.01% while S&P 500 futures are pointing to a positive open on Wall Street. Oil and gold prices fell, and the US 10-year Treasury yield inched higher to 1.969%.
EURUSD traded in a 1.1317-1.1358 range supported by the tepid response to Russia’s actions, somewhat hawkish comments by ECB playmakers and by 5.1% Eurozone HICP inflation in January. That news helped offset the disappointing German Gfk Consumer Confidence Survey which dropped to -8.1 instead of the expected -6.3. The EU are expected to announce another round of sanction on Russia today. The intraday EURUSD technicals are bullish above 1.1300 looking for a break of 1.1400 to extend gains to 1.1450.
GBPUSD is trading at the bottom of its overnight 1.3585-1.3619 range despite BoE Governor Andrew Bailey suggesting inflation could stick at a high level.
USDJPY rallied as Treasury yields rose and risk sentiment improved. The intraday technicals are bullish looking for a break above 115.30 to extend gains to 116.00.
NZDUSD rallied after the RBNZ hiked rates the OCR rate 0.25% to 1.0% and issued a hawkish outlook. The bank upgraded its rate forecast and now expects the OCR rate to peak at 3.5% in 2023 rather than the 2.5% predicted in November. Governor Adrian Orr also said he couldn’t rule out 0.50% rate hikes in the future.
AUDUSD rallied on the improved risk tone, climbing from 0.7219 to 0.7266.
There are not any notable US economic reports today.
FX open, high, low, previous close as of 6:00 am ET
Chart: Saxo Bank
Today’s Bank of China Fix 6.3313, previous 6.3487
Shanghai Shenzhen CSI 300 rose 1.07%% to 4,623.05
Chart: China 5 day
Source: Saxo Bank