The central bank’s new Business Outlook Survey found firms in reasonably upbeat mood at the start of the year. In particular, decent first quarter sales were compounded by expectations for further gains over the year ahead. Today’s report should leave the BoC on course for another hike in interest rates before too long. Russia has been hit with even more sanctions, the most punitive yet, Russia’s stock markets fell the most in nearly four years. For the first time, major publicly traded Russian companies with global clients are on the black list.
North American equities are better, analysts believe that the potential trade war between China and the USA will likely subside, plus first quarter earnings by Wall Street will be better than expected.
The Canadian dollar is better on the Business Outlook, and further leaks that the NAFTA agreement may be renewed by the end of May, no confirmation as yet.
USDCAD 1.2688,1.2680, 1.2673 1.2715, 1.2720, 1.2825
USD-CAD has settled in the upper 1.2700s, above last week’s five-week low at 1.2733. News that the Trump administration is gunning for a preliminary NAFTA deal to be announced as soon as this week had been buoying the Canadian dollar. Former USD-CAD support at 1.2815 (which had been a two-week low) has reverted as a resistance level. Support is at 1.2699-1.2700.
EUR-USD has been plying a narrow path around the 1.2270 mark, consolidating Friday’s post-U.S. jobs report gains, which lifted the pair from the low 1.2200s. The weak U.S. data undercuts the influence the apparent slowing in Eurozone growth momentum, having a neutralizing affect on direction forces action on the pairing. EUR-USD remains near the midway levels of a broad consolidation range that’s been seen for some two months now, which has followed a 14-month rally phase from sub-1.0500 levels. More of the same seems likely for now.
Cable touched a 12-day high of 1.4118, extending dollar-weakness-driven gains from Friday, following the sub-forecast U.S. jobs report. The new high put a little more distance in from the three-week high posted last week at 1.3965. UK fundamental leads have been blurred by inclement weather in the last data month, which largely accounted for the big misses in last week’s March PMI survey outcomes. Data on Friday still hit a chord of truth, however, as it showed a 2.1% y/y gain in unit labour costs in Q4, up from a 1.4% y/y rise in Q3, which won’t be a surprise to either the BoE or those following monthly average pay data. OIS rates have continued to show about 80% odds for a 25 bp second-in-cycle rate hike by the BoE as soon as May. We have been prognosticating that Cable is in process of forming a trading range in the low-to-mid 1.4000s. Near-term resistance is at 1.4130, and support at 1.4057-60.