– SNB support for Credit Suisse eases some nerves.
– ECB ‘s promised 50 bp hike in question.
– US Dollar recedes overnight, but remains bid.
USDCAD snapshot open 1.3748-52, overnight range 1.3724-1.3769, close 1.3768, WTI $68.33, Gold $1921.88
The Canadian dollar is suffering from global banking concerns and falling oil prices.
West Texas Intermediate (WTI) prices have been sliding all month, dropping from $80.85/barrel on March 8 to $67.15 yesterday. It is a perfect storm from crude. Speculators have closed bullish positions established earlier in the year. The expected rise to $100.00/b looks like wishful thinking in light of China downgrading 2023 growth and the latest banking crisis raising recession risks.
Canada is not immune. RBC economists expect that the lagging impact from the 425 bps of Bank of Canada tightening will show up in reduced consumer spending and higher debt servicing costs. RBC is forecasting a recession in Canada and the US by mid-2023.
BoC Governor Tiff Macklem needs to take a lot of the blame for consumer woes. He encouraged Canadians to strap on debt in 20220, when he said rates would remain low for a long, long time. Oops!
Global markets were starting to think the mini-banking crisis that was sparked by the collapse of Silicon Valley Bank (SVB) had been contained by the Fed actions. The Credit Suisse debacle showed them the error of their ways.
Credit Suisse has been a basket case for years as inept management created crisis after crisis. The SVB collapse exacerbated Credit Suisse woes which roiled global markets. The Swiss National Bank stepped in with a $54 billion guarantee overnight, which eased but did not eliminate risk aversion.
EURUSD rallied from 1.0574-1.0635 due to the Credit Suisse funding announcement. Traders are awaiting the ECB press conference to see how President Christine Lagarde dances around inflation risks, banking concerns against the backdrop of the Russia-Ukraine war. The fun starts at 8: 15 am EDT).
GBPUSD continues to trade defensively after falling from 1.2180 yesterday. Prices chopped about in a 1.2033-1.2112 range and have slid to 1.2036 in NY trading. Traders are relieved that the UK budget avoid a Kwasi Kwarteng-style reaction and shifted their focus back to the global banking sector.
USDJPY slid from an overnight peak of 133.50 to 132.50 due to soft US Treasury yields and safe-haven demand for yen.
AUDUSD traded in a 0.6613 to 0.6661 range. Prices got a boost by a 64,600 gain in jobs (forecast 50,000) and a drop in the unemployment rate to 3.5%.
Today’s US data includes Philadelphia Fed Manufacturing Index, weekly jobless claims, building permits, and wholesale sales.