– Traders cautiously awaiting Powell speech at noon.
– Oil prices are steady but firm.
– US dollar opens consolidating yesterday’s gains. Commodity bloc underperforms.
USDCAD: open: 1.3729-33, overnight range 1.3709-1.3741, close 1.3717, WTI $85.72, Gold, $1950.99.
The Canadian dollar was sideswiped by surging US Treasury yields yesterday, and it continued to feel the effects overnight. USDCAD soared from 1.3618 to close at 1.3717 yesterday, then extended the gains to 1.3741 just before NY opened today.
West Texas oil has traded in a $84.87-$88.24/barrel range since Tuesday. Prices are underpinned by concerns that the Israeli-Hamas war may draw in other Arab nations, which could risk a major disruption in crude supplies. On the other hand, Middle East tensions, the ongoing Russia-Ukraine war, and rising US interest rates pose a serious risk to global crude demand.
On Wednesday, a group of Federal Reserve officials shared their insights regarding inflation and interest rates. Michelle Bowman’s statements conveyed apprehension about the persistence of high inflation and a steadfast commitment to restoring it to the 2% target, indicating a more hawkish sentiment. Conversely, Christopher Waller adopted a neutral position, emphasizing that it’s premature to ascertain whether further policy rate adjustments are necessary and advocating for a cautious approach of waiting and observing before taking decisive actions. Meanwhile, New York Federal Reserve President John Williams recognized the progress made in curbing inflation but underscored the need for continued restraint in interest rates over the foreseeable future. These remarks helped propel the US 10-year Treasury yield to 4.97%, and the widening Canada/US interest rate differential (in favor of the US) added fuel to the USDCAD rally.
It may be a similar story today. Fed policymakers Austan Goolsbee, Philip Jefferson, Patrick Harker, and Raphael Bostic are all offering their insights on the outlook of Fed monetary policy. However, the attention will be fixed on the New York Economics Club, where Fed Chair Jerome Powell will speak about the economy at noon.
EURUSD is adrift in a 1.0527-1.0550 range, with traders awaiting Powell’s speech and the ECB monetary policy meeting next week.
GBPUSD traded with a bearish bias in a 1.2090-1.2149 range due to broad US dollar strength and the risk of higher rates.
USDJPY remains firm within a 149.66-149.93 range despite surging US 10-year Treasury yields, as traders are reluctant to test the Bank of Japan’s resolve.
AUDUSD fell from 0.6341 to 0.6296 due to US dollar strength and a mixed Australian employment report, which showed the country gained only 6,700 jobs. However, negative sentiment was tempered by news that the unemployment rate dropped to 3.6% from 3.7%.
US weekly jobless claims are ahead.