April 14, 2022

  • Markets closed in Canada, UK, Europe, Australia NZ on Friday
  • ECB statement on dovish side, leaves rates unchanged
  • US dollar under pressure, largely ignores US data

FX change at a glance: 24 hours

Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.2544-48, overnight range 1.2542-1.2568, close 1.2563

Bank of Canada Governor Tiff Macklem takes inflation seriously. He said so. Yesterday’s 0.50% rate hike and the start of quantitative tightening are supposed to demonstrate his commitment. He’s a drama queen. A truly committed inflation fighter would have completely erased the pandemic rate cuts and returned interest rates to their pre-pandemic levels.  The overnight is now 1.0%, compared to 1.75% March 2, 2020.

USDCAD dropped following the BoC statement and MPR press conference, falling from 1.2674 to close at 1.2563. The move had more to due with a bond market rally than the BoC.

The US 10-year Treasury yield dropped to 2.656% from 2.718%. The improvement in global risk sentiment boosted stock markets with the S&P, and DJIA up 1.12% and 1.01% respectively.

Oil prices continued to be supported by Opec and IEA forecasts of sharply reduced supply due to existing and pending sanctions on Russia, which also weighed on USDCAD.

USDCAD inched higher following this mornings domestic data. Canada Manufacturing Sales rise 4.2% (forecast 3.6%) while Wholesale Sales reports falls 0.4% (forecast gain of 0.9%)

USDCAD technical outlook  

The intraday USDCAD technicals flipped to bearish with the break below 1.2590 snapping a week-long uptrend. A break below 1.2530 targets 1.2505 and 1.2480, while a break above 1.2610 suggests a re-test of the 1.2680 area. Longer term, the uptrend line from October 2021 comes into play at 1.2440, while 1.2880 caps gains.

For today, USDCAD support is at 1.2530and 1.2480.  Resistance is at 1.2590 and 1.2640.  Today’s Range 1.2510-1.2610

Chart: USDCAD 4 hour

Source: Saxo Bank

G-10 FX recap and outlook

Markets are cautious heading into the Easter long weekend due to the threat of adverse developments from the Russia/Ukraine war. Russian officials are not doing anything to alleviate concerns. Security Council Deputy Chair Dmitry Medvedev talked nukes. He said that if Sweden and Finland joined NATO, “There can be no more talk of any nuclear–free status for the Baltic – the balance must be restored,”

Fed officials have been holding out on markets. After years of saying they were unable to explain why inflation is low, they can predict peak inflation. At least Fed Governor Christopher Waller can. He claimed that “inflation has pretty much peaked,” but the Fed still needs to tighten policy. Tuesday, Vice Chair Lael Brainard suggested that weaker than expected core inflation could point to some “cooling ahead.”

Elon Musk wins the “Tweet of the Day” award. He offered to buy Twitter at $54.20/share, which is 38% above Twitters April 1 price.

Why join the board when you can be the board?

Asia equity markets closed with gains led by a 1.22% rise in Japan’s Nikkei 225. European bourses are following suit but off their best levels. S&P 500 and DJIA futures are flat after paring earlier gains. The improved risk tone knocked gold and oil prices lower.

US weekly jobless claims rose 18,000 to 185,000. The US Census Bureau said “March retail sales rose 0.5 % from the previous month, and 6.9% above March 2021.

EURUSD rallied on broad US dollar weakness, rising from 1.0884 to 1.0923 overnight and then gave back all the gains after the ECB monetary policy statement, dropping to 1.0864.  The ECB left rates unchanged and said they would not change until some time after the end of the APP program ends in Q3.

GBPUSD slipped to 1.3105 after consolidating yesterday’s gains in a 1.3114-1.3146 range overnight. GBPUSD continues to be underpinned by yesterday’s high CPI reading and its implication for UK rates, alongside broad US dollar weakness, and position adjusting ahead of the long weekend.

USDJPY dropped from 126.31 yesterday to 125.09 overnight on the heels of the sharp drop in the US 10-year Treasury yield. Prices bounced to 125.50 in NY after the US data.

Japanese Finance Minister Shunichi Suzuki continued to tell whoever would listen that authorities are keeping a close eye on exchange rates. However, may analysts do not expect any action until prices hit 130.00.

AUDUSD dropped from 0.7465 to 0.7440, partly due to weaker than expected headline unemployment. AUDUSD is still higher than it was at yesterday’s NY open, thanks to broad US dollar weakness. Australia added 17,500 jobs compared to forecasts of a 40,000 gain. The damage was mitigated by the Unemployment rate remaining at 4.0%.

Michigan Consumer Sentiment is ahead.

Chart: USDJPY hourly

Source: Saxo Bank

FX open, high, low, previous close as of 6:00 am ET

Chart: Saxo Bank

China Snapshot

Today’s Bank of China Fix 6.3540 (Previous Fix 6.3752)

Shanghai Shenzhen CSI 300 rose 1.25% to 4,191.57

There are rumours that the PBoC will cut interest rates on Friday

Chart: China hourly, 1 month

Source: Yahoo Finance