CAD, GBP, EMFX outperform, EUR up, oil prices slide

DXY Steady into FOMC, JPY Stays Week Ahead of BOJ

Summary: The British Pound rebounded against the US Dollar (GBP/USD) to 1.3045 from 1.3000 yesterday, boosted by a robust UK Jobs report which beat expectations. Britain’s Unemployment rate fell to 3.9%, its best since August 2020. Ahead of tomorrow’s Bank of England meeting, markets have fully priced another 25-basis point interest rate hike. Against its various rivals, the US Dollar finished mixed. The USD/JPY pair grinded higher to 118.30 from 118.15 extending its gains from yesterday supported by rising US bond yields. The benchmark US 10-year Treasury note edged up to 2.14% (2.13% yesterday). Despite a slide in Brent Crude Oil by 7.75% to USD 98.60 (USD 106.00), Canada’s Loonie rallied against the Greenback. The USD/CAD pair settled 0.44% lower to 1.2765 from yesterday’s open of 1.2815. The Euro (EUR/USD) steadied to 1.0947 (1.0940). Ukraine and Russia were relegated to the background as the market focussed on interest rates. The Australian Dollar was little changed at 0.7195 (0.7200). A popular gauge of the Greenback’s value against a basket of 6 major currencies, the Dollar Index (DXY) settled at 99.03 (99.06 yesterday). Elsewhere, better-than-expected Chinese Retail Sales and Industrial Production failed to lift the Australian Dollar against the Greenback. Against the Offshore Chinese Yuan, the US Dollar (USD/CNH) slumped to 6.3825 from 6.3950. The Greenback was mostly lower against the Asian and Emerging Market currencies. USD/SGD fell to 1.3655 (1.3675) while USD/INR eased to 76.25 from 77.00.

Wall Street stocks rebounded. The DOW finished at 33,507 (32,977) while the S&P 500 gained 1.9% to 4,257 (4,180 yesterday).
Data released yesterday saw Germany’s Wholesale Price Index climb to 1.7%, beating median forecasts at 0.9%. China’s Foreign Direct Investment rose to 37.9% from 11.6%. China’s Retail Sales climbed to 6.7% from a previous 1.7%, beating forecasts at 3.4%. Industrial Production jumped 7.5% in February from a previous 4.3%, and bettering expectations at 4.0%. China’s Jobless Rate though rose to 5.5% against median forecasts at 5.1%. UK Claimant Count Change (number of people claiming unemployment benefits) fell to -48,100, beating expectations of a rise of 20,300. The Eurozone Sentix Investor Confidence Index fell to -38.7 against forecasts of 10.3. Germany’s Sentix Investor Confidence Index was also lower to -39.3 against expectations of 5.2. Canada’s Housing Starts climbed to 247,000 units from a previous 229,000. US Producer Price Index eased to 0.8% from a previous 1.0%, and lower than forecasts of 1.0%. US Core PPI fell to 0.2% from 0.8%, lower than expectations at 0.6%.

• GBP/USD – robust UK Employment data coupled with expectations of another 25 bp rate at the conclusion of tomorrow’s Bank of England policy meeting boosted Sterling. GBP/USD soared to an overnight high at 1.3089 from yesterday’s open at 1.3005, settling at 1.3045.
• USD/CAD – Against the Greenback, Canada’s Loonie outperformed following robust Canadian Employment data. The USD/CAD pair tumbled to an overnight low at 1.2761 (1.2817 yesterday), settling at 1.2765 in early Asia.
• USD/JPY – against the Japanese Yen, the Greenback managed to maintain its strength supported by rising US bond yields. The USD/JPY pair closed at 118.30 in New York from 118.15 yesterday. Overnight high traded was at 118.45.
• AUD/USD – the Australian Dollar was little changed against the Greenback at 0.7195 from yesterday’s 0.7200. Overnight low for the AUD/USD pair was at 0.7165 which is strong support. The Aussie Dollar though was mixed against the other major and EM currencies.

On the Lookout: Today’s economic calendar is light heading into the Federal Reserve’s FOMC meeting and announcement (Sydney tomorrow morning, 17 March at 5 am). The US central bank is widely expected to raise its Fed Funds rate to0.5% from 0.25%. New Zealand kicked off today with its Current Account, where the Deficit rose to -NZD 7.26 billion against expectations of -NZD 6.231 billion. The Kiwi (NZD/USD) was flat at 0.6765, where it closed in late New York. All data releases and forecasts today are courtesy of ACY Finlogix. Japan releases its Reuter Tankan Index for March (no f/c, previous was 6). Japan also releases its February Trade Balance (Deficit of -JPY 112.6 billion from a previous -JPY 2191.1 billion), Japanese Final Industrial Production for January (m/m f/c -1.3% from -1%). Australia follows with its February HIA New Home Sales (no f/c, previous was 0.1%). China releases its February House Price Index (y/y no f/c, previous was 2.3%). Europe starts off with Italy’s Final February Inflation Rate (y/y f/c 5.7% from 4.8%). Canada starts off North America with its February Headline CPI (m/m f/c 0.9% from 0.9%; y/y f/c 5.5% from 5.1%). Canadian Core CPI (y/y f/c 4.5% from 4.3%). The US rounds up today’s data releases with its February Headline Retail Sales (m/m f/c 0.4% from 3.8%; y/y no f/c, previous was 13%). US Core (excluding gasoline/automobiles) Retail Sales (m/m f/c 0.9% from 3.3%; y/y no f/c, previous was 3.8%).

Trading Perspective: Supported by ongoing risk-off sentiment on the Ukraine crisis, and expectations of higher US interest rates, the Dollar heads into tomorrow’s FOMC meeting steady to higher against its Rivals. Which suggests that market positioning is clearly long of Greenbacks/short of currencies. Both the British Pound and the Canadian Dollar managed gains on position adjustments. The one constant that remained is the elevated volatility in FX. Ahead of this week’s central bank meetings (Fed, BOE, BOJ) we can expect more of the same ahead. The Federal Reserve is widely expected to hike it’s Fed Funds rate to 0.5% from 0.25%. Traders will be looking into the comments made by various Fed officials following the meeting. In the data department, US Retail Sales are forecast to fall dramatically from previous releases. Anything outside of those expectations will see further choppy trading. While the Dollar is bid overall, speculative long USD bets continue to grow. The short-term risk is for a disappointment which could see downward corrective moves for the Greenback.

• EUR/USD – The Euro steadied to 1.0947 in late New York from 1.0940 yesterday. In choppy trade the shared currency fell to a low at 1.0926. Which was higher than the previous night’s base at 1.0901. Overnight high recorded was at 1.1020. For today immediate resistance can be found at 1.0980, 1.1010 and 1.1030. Immediate support lies at 1.0925, 1.0900 and 1.0870. Look for further choppy trade in a likely range today of 1.0920-1.1020.
• AUD/USD – the Australian Dollar was little changed against the Greenback, closing at 0.7195 from 0.7200 yesterday. Overnight, the AUD/USD pair traded to a low at 0.7165. Immediate support which is strong lies at 0.7165. The next support level is found at 0.7135. On the topside, immediate resistance is at 0.7225 (overnight high 0.7227). The next resistance level lies at 0.7255 and 0.7285. Look for a likely trading range today of 0.7160-0.7260. The risk is higher given that the specs are running short although a firming Greenback will prevent any strong Aussie Dollar gains. Trade the range.
• USD/JPY – supported by rising yields, the Dollar continued to grind higher against the Japanese currency, finishing at 118.30 (118.15 yesterday). Overnight high traded was at 118.45, which is today’s immediate resistance. The next resistance level is found at 118.75 followed by 119.00. Immediate support lies at 118.00, 117.70 and 117.40. Look for the USD/JPY to stay bid until tomorrow’s Fed meeting. Likely range today – 117.80-118.80.
• USD/CAD – Despite lower oil prices, the Canadian Loonie outperformed lifted by robust Canadian Employment data. The USD/CAD pair settled at 1.2765 from 1.2815 yesterday. Overnight low traded was at 1.2761. Immediate support for today lies at 1.2760 followed by 1.2730 and 1.2700. On the topside, immediate resistance can be found at 1.2800, 1.2840 and 1.2870. Look for further volatility in this currency pair with a likely range of 1.2750-1.2850. Ahead of tomorrow’s FOMC, trade the range is best on this currency pair.

(Source: Finlogix.com)

Have a good Wednesday ahead. Trade well.