– Commodity currency bloc outperforms in March
– President Biden planning another SPR release
– US dollar opens
USDCAD Snapshot: open 1.2527-31, overnight range-1.2479-1.2532, close 1.2482, WTI open $101.18, Gold open $1,925.90
The Canadian dollar is poised to close out March with a solid gain, although it is substantially underperforming compared to the Australian and New Zealand dollars which have gained 2.96% and 2.45% respectively.
The Canadian dollar only managed to rise 1.10% despite a hawkish Bank of Canada outlook, and high oil prices.
Oil prices were in focus overnight thanks to President Biden. West Texas Intermediate oil dropped from $107.75/barrel to $100.60/b in Asia overnight after President Biden spoke of plans to release 1.0 million barrels/day from the Strategic Petroleum Reserves for at least six months.
Canadian authorities have adopted a different oil strategy. The Trudeau administration is raising their carbon tax on fuel to 11 cents a liter across the country.
Month-end and quarter-end rebalancing flows and the Russian invasion of Ukraine are making for a choppy FX session. The sharp gain in the S&P 500 in March implies portfolio managers need to sell US dollars, while disappointment from a lack of progress in Russia/Ukraine peace talks underpins the greenback.
Against that backdrop, Fed officials continue to chirp about the need for higher interest rates. Yesterday, Kansas City Fed President Ester George said, “Given the state of the economy, with inflation at a 40-year high and the unemployment rate near record lows, moving expeditiously to a neutral stance of policy is appropriate.”
EURUSD is trading at the bottom of its overnight 1.1103-1.1184 range. Prices climbed in Asia and dropped in Europe as hopes for a quick resolution to the Ukraine crisis faded. Euro area February unemployment dipped to 6.8% m/m compared to 6.9% m/m in January, but the data was lost in the geopolitical noise. The EURUSD downtrend from May 2021 remains intact below 1.1280.
GBPUSD traded erratically in a 1.3114-1.3147 range with prices supported by better than expected UK data. Q4 GDP rose 6.6% y/y, Housing Prices climbed 14.3% y/y and Business investment rose 1.0% y/y. GBPUSD is in an uptrend while trading above 1.3050 but needs to crack the 1.3210 area to accelerate gains.
USDJPY is in the middle of its overnight 121.35-122.44 range. Prices were pressured by a mix of Japanese fiscal year-end demand for yen, and the slide in US Treasury yields.
AUDUSD and NZDUSD traded lower due to the drop in commodity prices but have recouped some of the losses in NY.