Rising rates, continued lockdowns and commodity prices
USD CAD continues to find support from falling oil prices, with WTI dipping to two-week lows at $97.03. The extended slump in oil prices comes on the back of heightened worries over demand for oil and its products after the covid outbreaks in China. The Chinese authorities are planning to strengthen the restrictions in Shanghai while the lockdowns could extend to Beijing.
Safe-haven flows continue to dominate the financial markets with Wall Street’s main indexes trading deep in negative territory as the US Dollar continues to gain.
CAD/USD
The Bank of Canada raised the overnight rate 0.5% last Wednesday to 1.0%, in the first 50 point jump in 22 years. The next policy meeting is June 1 with expectations of a priced in a half-point increase in the overnight rate to 1.5%. Should the Fed hike 0.5% to 1.0% on May 4 and add another 0.5% on June 15 as expected, the policy rates of the two banks would be in tandem at 1.5%.
Canadian information is sparse in the week ahead with only February GDP on tap for Friday while peeches from several BoC officials, including Governor Macklem may provide comments on policy going forward.
The USD/CAD pair gained traction for the third successive day on Monday and climbed to a six-week high, around the 1.2765-1.2770 region during the first half of the European session on growing worries of an economic slowdown in China.
Trade ranges CADUSD 1.2453-1.2928
CAD/EUR
In France, Emmanuel Macron won the presidential re-election, as widely expected by markets and political analysts. The EU is preparing further sanctions on Russia, cutting oil imports from the country which would exacerbate inflationary pressures and economic slowdown in Europe. The EUR is expected to remain in consolidation with a risk appetite as the European Central Bank to raise interest rates by 25 basis points in July.
Trade ranges CADEUR1.3527-1.3881
CAD/JPY
The Japanese yen has also been the most affected by rising U.S. interest rates, as the central bank actively keeps its benchmark yields lowered. The dollar was a tiny bit firmer on the yen on Monday morning and has gained 11% to date. The 129.4 mark hit during the previous week was the highest for the USD/JPY pair in 20 years and is eyeing a push lower towards support in the 125.00 area, should the trends of weaker equities and commodities continue.
Trade ranges CADJPY 99.32-103.7
Major high risk data reports this week to note
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Tues April 26 |
USD Core Durable Goods Orders m/m |
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USD Durable Goods Orders m/m |
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AUD CPI q/q |
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Wed, April 27 |
JPY BOJ Outlook Report and Policy Rate |
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Thurs April 28 |
USD Advance GDP q/q |
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USD Unemployment Claims |
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Fri, April 29 |
CHF SNB Chairman Jordan Speaks |
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CAD GDP m/m |
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USD Core PCE Price Index m/m |
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USD Revised UoM Consumer Sentiment |