Spreading COVID-19 delta-variant raises questions around global growth outlook
European equities, S&P futures clawing back some of yesterday’s losses
Dovish BoE talk, negative risk sentiment sink GBP, US Dollar opens mixed
USDCAD open 1.2750-54, Overnight range, 1.2735-1.2783, Previous close 1.2747
FX at a Glance
FX Recap and outlook
Yesterday’s market “risk-off” panic is giving way to green shoots of optimism today. Asia equity indexes followed Wall Street’s lead and closed with losses, but not to the same extent. European bourses are in rally mode but have yet to fully recoup Monday’s losses. S&P 500 futures are up 0.47% (6:15 am), gold and oil prices are a tad firmer. US 10-year Treasury yields are 1.169%.
The Delta-variant is flying around the world, forcing governments to reimpose lockdown restrictions in some countries, including Australia. The US government issued a “Do Not Travel” advisory for the UK, which also spooked markets. Canada plans to open its borders to vaccinated Americans as of August 9, but so far, the American’s don’t want anything to do with the Canadians, as they have not reciprocated the invitation.
The US and UK claim China is behind the software hack at Microsoft in March, which of course, China denies.
China’s PBoC left interest rates unchanged.
EURUSD continued to consolidate recent losses, trading in an uninspiring 1.1773-1.1802 range. German PPI data was a tad softer (actual 1.3% vs May 1.5%) than previously, but not a factor. Traders are biding their time until Thursday’s ECB meeting.
GBPUSD dropped to 1.3629 from 1.3688 overnight and is down 0.68% from Monday’s NY open. Two Bank of England officials downplayed the risk that the BoE would raise interest rates soon. Catherine Mann, former Chief Economist at the OECD and a BoE voter in January, said the bank should not cut back on stimulus too early. Her remarks echo MPC member Jonathan Haskel who said yesterday, “in the immediate term, the risk of a pre-emptive monetary tightening curtailing the recovery continues to outweigh the risk of a temporary period of above-target inflation.”
GBPUSD broke below support at 1.3750 yesterday and moved below 1.3696, the 200 day moving average today. A decisive break below 1.3660 targets 1.3470.
USDJPY bottomed out at 109.06 yesterday and climbed steadily, reaching 109.73 in Europe, before sliding to 109.40 in early NY trading. The rally and retreat coincided with shifting risk sentiment and 10-year Treasury yields.
AUDUSD gave up Asia gains and dropped from 0.7356 to 0.7312 due to negative sentiment from the RBA minutes, soft commodity prices and spreading coronavirus cases. The RBA minutes didn’t offer anything new and repeated that a data-dependent rate hike is unlikely before 2024.
NZDUSD has retraced all gains following the RBNZ meeting which sparked forecasts for a rate hike by November, if not sooner. NZDUSD is trading alongside global risk sentiment and the currency is trading at 0.6891, a level last seen in December 2020.
USDCAD rallied to 1.2805 at yesterday’s NY open and has consolidated in a 1.2730-1.2785 since. Prices are tracking Wall Street, and broad risk sentiment, with slumping oil prices reinforcing the floor.
US Housing Starts rose 6.3% m/m in June, while Building Permits dropped 5.1% m/m.
USDCAD technical outlook
There intraday USDCAD technicals are unchanged from yesterday. They are bullish above 1.2630, a level guarded by support (former resistance at 1.2650, and underpinned by the 200 day moving average (1.2623). A break above 1.2805 targets 1.2870. For today, USDCAD support is at 1.2720 and 1.2650. Resistance is at 1.2810 and 1.2860. Today’s range 1.2720-1.2805
Chart USDCAD daily
Source: Saxo Bank
FX open, high, low, previous close
Source: Saxo Bank