Oil prices are now just below $70 USD a barrel for West Texas Intermediate, analysts still fear global trade wars, however, there is a different tune being played on global equity markets. Technology stocks are recording new highs giving optimism that there is strong earnings season around the corner. As a result, risk mode is now back in vogue and the risk currencies are benefiting from these trades.
Expect a narrow range the rest of the week.
USD-CAD rebounded to a 10-day high of 1.3220 from a 1.3063 low that was seen on a by-CAD reaction to the BoC’s 25 bp interest rate hike and guidance for tighter monetary policy to keep inflation near target. However, the statement also emphasized a “gradual approach, guided by data.” A 4%-plus dive in oil prices, as Libya announced recommencing supply, subsequently prompted selling of Canadian dollars, given the sensitivity of Canada’s terms of trade position to crude prices. USD-CAD has support at 1.3150-53.
EUR-USD is hovering at near net unchanged levels, holding a range in the upper 1.1600s after the pair printed a five-session low yesterday at 1.1665. EUR-JPY, in contrast, has ramped to two-and-a-half-month highs, drawn higher by broad yen underperformance today. We continue to see EUR-USD as being in a broadly consolidative phase, which has been unfolding for over a month now, following a six-week down phase from levels above 1.2400. The range over this period has been 1.1508 to 1.1851. More of the same looks likely for now, though strong U.S. economic growth and the Fed’s tightening course tip the fundamental balance in favour of the dollar, and so the downside of EUR-USD. Any move from Trump to follow-through on hits threats to tariff car imports would also be negative for the euro relative to the dollar. EUR-USD has support is at 1.1645-47.