USD/CAD Open: 1.2821-25,  Overnight Range: 1.2793-1.2840,  Previous Close: 1.2806

WTI Oil is at $106.87 and gold is at $2,002.80. US markets are lower today.

For today, USD resistance is at 1.2791. Support is at 1.2731.

• Today’s ECB meeting includes updated forecasts
• EURUSD rallies on profit-taking and short-squeeze
• CAD dollar underperforms vs commodity currency bloc

The Canadian dollar is the ugly step-child among the commodity bloc currencies.  The Australian and New Zealand dollars outperformed against the Canadian dollar overnight, continuing a trend that started at the end of February.

AUDUSD is benefitting as it has an array of high-demand commodities, including iron-ore, oil and gas, LNG, coal, and gold, and prices for that suite of goods have soared.  Australia also benefits from its physical distance from the Russia and Ukraine war.  AUDUSD does not seem to be suffering any ill-effects from the RBA monetary policy, which is to leave interest rates unchanged while policymakers “assess the data.”

Canadian dollar direction is closely correlated with the S&P 500 moves as stocks rise when risk sentiment is positive and fall when negative.  The S&P 500 clawed back all of Monday’s losses on Tuesday and then spent the overnight consolidating the latest gains but it is trading below the session peak in NY.

Recent Canadian dollar losses were exacerbated, to a degree, by sharply falling oil prices.  West Texas Intermediate traded at 129.30 on Monday, then plunged to 104.80 Wednesday after the UAE Ambassador to the US suggested OPEC could raise production to help alleviate the sticker shock at gas pumps.  Prices rebounded to $114.16 today, after the UAE oil minister contradicted the Ambassador and following news that US weekly crude inventories fell by 1.86 million barrels.

US inflation is expected to have risen to 7.9% y/y in February, but that forecast has plenty of upside risk due to the inflationary impact of higher crude prices.  That result won’t change expectations for the Fed to raise US rates 0.25% next week, but a reading above 8.1% might spark talk of a 0.50% hike.

The ECB meeting will be a closely watched affair, and EURUSD rallied from 1.1027 to 1.1079 ahead of the results.  The ECB was expected to announce a hawkish shift at today’s meeting, but the Russia/Ukraine war probably derailed those plans.  The updated forecasts are expected to show higher inflation and slower growth.

GBPUSD traded in a 1.3143-1.3193 range while USDJPY surged to 116.19 from 115.82 due to sharply rising Treasury yields.

AUDUSD rallied to 0.7345 from 0.7289 due to improved risk sentiment and higher than forecast Consumer Inflation Expectations (actual 79% vs73% forecast).

US weekly jobless claims are expected to be unchanged at 216,000.

Today’s Suggested Range USD/CAD: 1.2730 – 1.2830