Canadian Dollar Update, March 23, 2022 – Canadian Dollar Drifting
USD/CAD Open: 1.2583-87, Overnight Range: 1.2567-1.2589, Previous Close: 1.2569
WTI Oil is at $114.91 and gold is at $1,943.60. US markets are lower today.
For today, USD resistance is at 1.2580. Support is at 1.2552.
- US 10-year Treasury yield hits 2.417%
- WTI oil trending higher on new supply concerns
- Commodity bloc currencies lead US dollar lower
The Canadian dollar is drifting in a well-defined USDCAD range of 1.2550-1.2650. Canadian dollar demand from surging crude oil prices is being offset by a rash of hawkish comments from FOMC officials.
Traders ignored domestic political drama. Justin Trudeau’s Liberal party absorbed Jagmeet Singh’s NDP party in a move disguised as cooperative agreement rather than a friendly take-over. However, the deal has nasty ramifications for fiscal prudence. Canada is already suffering from massive government debt and budget deficits and this deal all but guarantees the deficits will get worse.
West Texas Intermediate oil prices rallied from an overnight low of $108.43 to $112.31, partly due to a steep drop in US crude inventories and because of a storm in the Caspian Sea damaging export terminals. The American Petroleum Institute reported US crude inventories fell 4.28 m/barrels in the week ending March 18. Even worse, loading facilities at the Caspian Pipeline Consortium (CPC) terminal may remove 1.0 million barrels per day of Russian oil from the market.
FX markets are trading cautiously as President Biden heads to Europe carrying a list of over 300 Russian politicians who will face sanctions. Nevertheless, the only meaningful sanction is a total ban of Russian oil, and many European governments oppose such a move.
Asia equity markets closed with gains, following on the heels of the positive close on Wall Street. Japan’s Nikkei 225 gained 3.0%, fueled by a steep drop in the Japanese yen. European equity markets opened on a positive note, but it didn’t last, and the major indexes are in negative territory, except for the UK FTSE 100. Wall Street is poised to open lower.
Fed officials are enthusiastically hawkish. Former dove San Francisco Fed President Mary Daly has embraced higher US rates. Yesterday she said, “Even though we have these uncertainties around Ukraine, and we have the uncertainties around the pandemic, it’s still time to tighten policy in the United States.” Her colleague Loretta Mester wants rate hikes front-loaded to give policy makers flexibility.
EURUSD traded in a 1.0990-1.1043 range and has been on the defensive after failing to break above 1.1050 overnight.
GBPUSD rallied in Asia, rising from 1.3250 to 1.3297, then dropped steadily in Europe, reaching 1.3218 in early NY. UK February inflation soared to 6.2% y/y compared to 5.5% in January, while the Retail Price Index rose 8.2% y/y compared to 7.8% previously.
USDJPY rose to 121.41 from 120.80 due to the rise in US 10-year Treasury yields and the dovish Bank of Japan outlook.
The US data calendar is empty, and Fed Chair Jerome Powell gives another speech today.
Today’s Suggested Range USD/CAD: 1.2540 – 1.2640