BoJ and Riksbank leave monetary policy unchanged
France and Britain chirping over fishing rights
US dollar edges higher, S&P 500 futures flat
FX at a Glance
FX Recap and Outlook
The US dollar recouped some losses in a cautious overnight FX session as traders bide their time ahead of tomorrows FOMC meeting. The meeting should be tame as no changes to interest rates or monetary policy are forecast. Surprises have been known to happen, so perhaps Mr Powell mimics BoC’s Tiff Mackem and talks of rate hikes earlier than expected.
Asia equity indexes closed mixed to lower and European bourses are in the red. Wall Street futures are flat ahead of a heavy earnings calendar. Oil prices are steady even as Opec meets to discuss production increases.
EURUSD drifted lower, falling from 1.2088 to 1.2058, before inching back to 1.2071 in NY. Sweden’s Riksbank left monetary policy unchanged and stressed the need for monetary stimulus. The Eurozone economic calendar was empty. EURUSD is supported by expectations for a robust global economic rebound, while gains are capped by fears of higher interest rates from rising inflation. The intraday technicals are bullish while prices are above 1.2040.
GBPUSD traded in a 1.3860-1.3900 range, with prices tracking broad US dollar sentiment. France and Britain are sniping at each other over fishing rights. French fishermen complain they can’t get permits to fish in UK waters and UK fisherman say exports to the EU are hampered by red tape. GBPUSD is suffering as the euphoria over its vaccination outperformance wanes. However, prices are underpinned by BoE Deputy Governor Ben Broadbent’s comments yesterday, suggesting rapid growth in the coming quarters. GBPUSD looks to retest resistance at 1.4100.
USDJPY climbed from 108.09 to 108.42 due to higher US 10-year Treasury yields, which rose to 1.583% from 1.56%. The Bank of Japan left interest rates and monetary policy unchanged, as expected. The benchmark rate remains at -010%. The BoJ expects the economic recovery to improve but at a moderate pace, while the coronavirus makes the outlook uncertain.
AUDUSD and NZDUSD drifted lower due to broad US dollar demand and profit-taking ahead of the FOMC meeting. However, high commodity prices, including copper and iron-ore, are supporting prices. Australian inflation data is due tomorrow.
Oil prices are steady. Reuters reported that Opec is keeping its demand forecast unchanged even as India’s COVID-19 crisis lowers demand in that country. WTI Traded in a $61.94-$62 70 range with a modestly bullish bias.
USDCAD consolidated losses in a 1.2391 to 1.2417 range. Prices are tracking US dollar sentiment but have an underlying negative bias. The Bank of Canada’s hawkish tilt, the bullish crude price outlook and combined with the break of technical and psychological support in the 1.2490-1.2500 area suggest further losses and a test of 1.2000. S&P affirmed Canada’s debt rating at AAA, Outlook Stable
BoC Governor Tiff Macklem appears before the House of Commons Finance Committee. He is expected to repeat his remarks from the MPR press conference.
The intraday USDCAD technicals are bearish below 1.2440 looking for a break of 1.2380 to extend losses to 1.2320. The longer-term downtrend is intact below 1.2630 suggesting a move below 1.2260 will extend losses to 1.2000. For today, USDCAD support is at 1.2380 and 1.2340. Resistance is at 1.2420 and 1.2450. today’s Range 1.2360-1.2440
Chart: USDCAD daily
Source: Saxo Bank
FX open, high, low, previous close
Source: Saxo Bank