– BoC Governor Macklem delivers remarks on economy today.
– Thee US data calendar is empty leaving traders looking for a catalyst.
– US dollar opens with a bid tone
USDCAD: open 1.3538-42, overnight range 1.3506-1.3544, close 1.3540, WTI $72.86, Gold, $2023.97.
The Canadian dollar continues to nurse its wounds and is flirting with major support once again. The sharp USDCAD rally that occurred on the heels of Friday’s US employment report and was exacerbated by Fed Chair Powell’s comments in a 60 minute interview on Sunday, got another boost after yesterday’s US ISM Services report. ISM Services PMI jumped to 53.4 from 50.5. It was the strongest print since September 2023 and is further evidence that the US economic boom is far from slowing.
The news was another wet blanket for those expecting aggressive Fed rate cuts which was clearly evident as the US 10-year Treasury yield climbed to 4.16%. Wall Street was not happy either and the major indexes closed with losses.
Bank of Canada Governor Tiff Macklem is in Montreal today and will be talking about “The effectiveness and the limitations of monetary policy.” He is unlikely to offer any fresh insight as noting has changed since the monetary policy meeting on January 24.
Chinese authorities are trying to shore up the stock market. The Shanghai Shenzhen CSI 300 index has fallen 40% since it peaked in February 2021. The index gained 3.0% overnight on reports that government entities were buying ETF’s and ahead of a meeting between regulators and Xi Jinping.
EURUSD is spinning its wheels in a 1.0724-1.0762 range with gains limited by bearish technicals while below 1.0780, which is also the 100-day moving average. Eurozone retails were a disappointing -1.1% m/m, compared to November’s 0.3% increase.
GBPUSD is directionless inside a 1.2529-1.2585 band. Prices peaked after January Construction PMI was 48.8, a tad better than the forecast of 47.3 and December’s 46.8 reading. Yesterday, BoE Chief Economist Hu Pill said the question for policymakers is when to cut rates.
USDJPY traded in a 148.37-148.82 band in a subdued session due to the rally in the US 10-year Treasury yield stalling at 4.17%. Household spending fell 2.5% (forecast -2.1%) and total cash earnings rose 1.0% m/m.
AUDUSD traded in a 0.6478-0.6522 range. It peaked after the RBA decision, then retreated into the NY open. The RBA left rates unchanged at 4.35%, as expected, and like central banks everywhere, complained that inflation at 4.1% was still too high. The statement also warned that “a further increase in interest rates cannot be ruled out.”