Source: Wikipedia

March 1, 2022

  • WTI soars to $101.50/b in NY trading
  • Canada Q4 GDP beats expectations, but not monthly data
  • US dollar down from yesterday, steady overnight

FX at a Glance 24 hours

Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.2667-71, overnight range-1.2655-1.2692, close 1.2669

USDCAD dropped from a peak of 1.2806 in Asia on Monday to 1.2661 just before the close and then spent the overnight session see-sawing in a narrow 1.2656-1.2683 band before making a new session high in early NY trading

Soaring oil prices are limiting USDCAD upside.  Oiltraders are concerned that Russian energy shipments will be disrupted or even sanctioned, which will not be offset by the Opec 400,000 barrel/day production increase that was previously announced. The US and its allies are also talking about a coordinated release of 60 million barrels from the Strategic Petroleum Reserves. EU politicians want to take advantage of the surge in crude prices to slap an “windfall tax” on oil companies.

WTI traded in a $95.37-99.21/b range overnight, then spiked to $101.50 in NY trading as the Russian invasion continues.

Canada Q4 GDP rose 6.7% y/y in December, well above the 6.2% forecast driven by business investment and home ownership transfer costs.  Home transfer costs are another name for taxes and higher prices mean the government takes a bigger tax bite.

The news is overshadowed by the anticipated Bank of Canada 0.25% rate hike tomorrow, and the downgrade in March US rate hike expectations from 0.50% to 0.25%. The BoC will not have a press conference after tomorrow’s monetary policy meeting, but Governor Macklem delivers and “Economic Progress Report” Thursday at 11:30 am.

USDCAD technical outlook

The intraday USDCAD technicals are bearish below 1.2730 looking for a break below 1.2640 to extend losses to 1.2550.  A rally above 1.2730 targets 1.2780, Then 1.2830.  the long term uptrend line from June 2021 remains intact above the 1.2500-10 zone. A decisive move below 1.2500 puts 1.2000 in play.

For today, USDCAD support is at 1.2640 and 1.2590.  Resistance is at 1.2710 and 1.2740. Today’s Range 1.2640-1.2710

Chart USDCAD hourly

Source: Saxo Bank

G-10 FX recap and outlook

US President Biden’s State of the Union address is tonight, but traders are more interested in his State of the Eastern-Europe views.

President Putin ignored world outrage and sanctions and continued with his attack on Ukraine, which continues to rattle global risk sentiment.

Even Switzerland got into the act and joined the EU in sanctioning Russia.  Putin’s actions must be more abhorrent to the gnomes of Zurich than any of the antics by other despots, tyrants, and mass-murderers, whose financial assets were welcomed with open arms and secret accounts.

The US 10-year Treasury yield dropped from 1.867% to 1.723% yesterday after the Russian/Ukraine peace talks failed.  Yields consolidated the losses overnight but rebounded to 1.79% in NY, indicating an easing in safe-haven demand.   That helped S&P 500 futures recover some of its overnight losses. Gold gained 1.0% and oil is sharply higher.

EURUSD slid to 1.1142 from 1.1232 due to concerns about the impact of the Russia/Ukraine strife on the Eurozone.  German HICP inflation rose 5.5% y/y, a tad higher than the 5.4% forecast but ECB officials are sticking to their belief that inflation levels will fall. Bank of Finland Governor  Ollie Rehn said their was a risk of stagflation but if so, it was not going to be like the 1970’s era of high inflation low growth.

GBPUSD is choppy in a 1.3384-1.3436 band. Prices are weighed down by negative risk sentiment but garnering some support from sales of EURGBP.  The downside is also modestly insulated by expectations for the Bank of England to raise interest rates this month.

USDJPY is trading in a 114.72-115.28 range with price action dictated by general risk sentiment and Treasury yields.

AUDUSD climbed to 0.7288 from 0.7248 mainly because of rising commodity prices and a mild improvement in risk sentiment in NY trading. The Reserve Bank of Australia (RBA) left the OCR rate unchanged at 0.10%, as widely expected.  The statement reiterated that the cash rate would not rise until inflation was sustainably in the 2-3% target band.

Chart of the Day:  AUDUSD

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 6.3014, previous 6.3222

Shanghai Shenzhen CSI 300 rose 0.83% to 4,619.69

Caixin Feb PMI 50.4 vs forecast 49.3, January 49.1

NBS Feb PMI 50.2 vs forecast 49.9, January 50.1

Chart: China 1 month

Source: Saxo Bank