USD/CAD: Looine to strengthen further – MUFG

Matías Salord FXStreet

Analysts at MUFG Bank, point out the higher price of crude oil should encourage a stronger Canadian dollar. They see the USD/CAD trading at 1.2200 by the end of the third quarter and at 1.2000 by the fourth quarter.

Key Quotes:

“The Canadian dollar strengthened in March along with AUD, NOK and NZD with the consistency being the obvious commodities linkage. These four currencies outperformed the US dollar while the rest of G10 depreciated. Mineral fuels, precious metals – mainly gold, timber, minerals and aluminium made up 5 of Canada’s top 10 exports, accounting for nearly 40% of exports.”

“USD/CAD was held back from steeper falls by the move in the US-CA spread in favour of the US dollar – the spread jumped by 18bps in March given the scale of shift in expectations for rate hikes by the Fed. Given Canada’s linkage to the US, moves in the 2yr spread tends to have a greater influence.”

“The hawkish Fed and expectations of a 50bp hike on 4th May likely means the BoC will hike by 50bps on 13th April. BoC vs Fed direction via the 2yr spread will remain the key driver of CAD direction and while crude oil volatility will at times influence CAD direction, the price action to date this year suggests oil developments will be secondary to spreads.”

Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

AUD/USD looks offered just above 0.7100

AUD/USD has extended Monday’s pessimism, briefly breaching below the key. 0.7100 contention zone to hit three-day lows. The firmer tone in the Greenback has been keeping the Aussie under pressure while investors continued to gear up for the upcoming Trump-Xi Summit on Thursday.

USD/JPY holds small gains near 157.50 as JPY intervention risks loom

USD/JPY posts modest gains while trading near 157.50 in the Asian session on Tuesday as intervention fears help limit losses for the Japanese Yen. However, the BoJ's dovish rate hike to a 31-year high keeps JPY bulls on the back foot. Meanwhile, the US Dollar retains a bullish undertone amid the Fed's hawkish outlook and escalating Middle East tensions, providing tailwinds for the pair.

Gold makes a U-turn; focus shifts to $4,400

Gold regains balance and now trades with decent gains, approaching the key $4,400 mark per troy ounce on Tuesday. The yellow metal’s advance comes despite the resumption of the buying interest in the US Dollar, mixed US Treasury yields and geopolitical uncertainty.

XRP retains bullish outlook despite paring gains above $1.50

Ripple (XRP) trades elevated above $1.52 on Tuesday despite experiencing a minor correction from the previous day’s high of $1.57. XRP framed the uptrend last week, rising alongside the broader bullish cryptocurrency market.

Trump meets Xi: Why markets are watching this summit so closely

United States (US) President Donald Trump and Chinese President Xi Jinping are set to meet in Washington on Thursday for a summit closely watched by markets. After several months of easing trade tensions between the US and China, the meeting could determine whether the world's two largest economies extend their truce or enter a new period of uncertainty.

BoJ Recap: Not as hawkish as expected

The Bank of Japan (BoJ) raised its short-term interest-rate target to 1.25% from 1.00% in a 7-2 vote, marking another step in the normalisation of monetary policy and widely matching what everyone has been expecting for weeks.