Garo Mavyan | Retail FX & Precious Metals TraderMuch to the dismay of motorists around the world, oil prices have seen a seemingly unstoppable upward spike since the beginning of the year. The reasons are various: in the United States, several critical refineries have been closed either for repair or maintenance. Growing instability in key oil exporting countries such as Iran, Libya and Venezuela have limited the market's supply. OPEC, which controls nearly half of the world's oil production, has announced its members intend to cut quotas. Due to these developments, oil prices have climbed nearly 40% so far this year. Gas prices across Canada have risen accordingly, and British Columbians are paying some of the highest record-breaking prices in Metro Vancouver. Though some Canadian provinces have already introduced it, the recent implementation of a federal carbon tax in more provinces is cranking up the pressure. Still, the current sting that Canadians are feeling in their wallets is an important reminder of the need to balance supply and demand.
U.S. retail sales jumped by the most since September 2017 as gains in motor vehicles and gasoline stations boosted sales, signaling consumers are giving the economy greater support. The value of overall sales in March rose 1.6 percent after an unrevised 0.2 percent decrease the prior month, according to Commerce Department figures released Thursday. That exceeded all forecasts in Bloomberg's survey calling for a 1 percent gain. A separate report Thursday from the Labor Department showed filings for unemployment benefits fell last week to a fresh a 49-year low.
U.S. stocks were mixed as health-care providers tumbled on concern about policy changes, while the latest batch of corporate earnings did little to boost confidence in the economy. The S&P 500 Index slipped back toward 2,900 while The Nasdaq 100 Index touched an all-time high. Data overnight showing China's economic growth, industrial production and retail sales all topped estimates boosted equities around the world. The Stoxx Europe 600 Index erased a drop, while shares rose in Japan and Shanghai. The yield on 10-year Treasuries turned lower after climbing to a 4-week high and the dollar fell amid data showing the U.S. trade gap unexpectedly narrowed. European debt also dropped, while the euro strengthened even as Germany's economy ministry revised its growth forecast lower. As earnings continue to pour in, investors are growing more confident the anticipated drop in first-quarter results won't spoil the year. At the same time, central banks around the world remain accommodative, and the latest Chinese data appears to have calmed jitters that the world's second-largest economy was headed for a slowdown. Elsewhere, oil climbed after data showed a surprise drop in crude inventories. The New Zealand dollar retreated after inflation slowed more than forecast, while the Australian dollar rose after the Chinese data.
Steve Brown, Senior Corporate Trader | Stevebrown@vbce.ca
The CAD gained against the USD, JPY, and GBP this week while losing a bit of ground to the EUR and AUD. For the second week in a row, the major currencies were confined to a narrow range for most of the week before extending gains against the USD and JPY on Friday which saw the USD index fall to a 3 week low. USDCAD moved lower early in the week from 1.3390 down to 1.3284 (near a 6 week low) on the back of higher oil prices (WTI crude touched a new 5 month high @ $64.70). The move lower came despite softer equity markets on concerns the U.S. would impose tariffs on the European Union. In addition, the IMF revised its global growth forecast from 3.5% down to 3.3% - the 3rd negative revision over the past 6 months. The move below 1.3300 did not sustain and the pairing moved back up to 1.3360 ahead of Wednesday's U.S. CPI inflation data. The headline beat expectations while the core data was a touch soft. USDCAD dropped back down to 1.3306 as the USD broadly weakened ahead of the U.S. Fed minutes. USD selling ceased after the Fed was not as dovish as the market expected and the USD broadly recovered during Thursday's session taking USDCAD up to a weekly high of 1.3398. Oil prices sold off after failing to break above the $64.70 level for the 3rd time this week. The trend abruptly changed again on Friday as much stronger than expected trade data out of China sent global markets and oil prices higher / the USD and JPY lower. USDCAD dropped from 1.3380 down to 1.3312, although oil prices did fail for a 4th time to break the $64.70 level. The TSX and DJIA both traded near historical highs.
U.S. stocks edged toward all-time highs as investors sifted through a group of high-profile earnings for clues on the strength of the American economy. The 10-year Treasury yield reached its highest level since the March Federal Reserve meeting.Treasuries continued to slump, with rates reclaiming levels last seen before the Fed's dovish tilt a month ago. In Europe, equities climbed for a fifth day, driven by insurance and financial services firms. In Asia, shares in China and Hong Kong outperformed markets in Japan and South Korea. The euro pared a decline after Bloomberg reported that European Central Bank officials are said to lack enthusiasm for any revamp of their negative-interest rate tool.
The S&P 500 Index halted a 3-day advance as Goldman Sachs Group Inc. retreated after missing estimates for sales and trading revenue. Citigroup Inc. was little changed after its revenue matched expectations. The benchmark for American equities is near a 6-month high and less than 1% from its record after a torrid run so far in 2019. The Stoxx Europe 600 Index traded in a tight range Monday, as losses in mining shares offset increases in media and insurance. The euro strengthened for a second day. In Asia, equities approached a fresh six-month high, propelled by markets in Japan and Korea, following the Bank of China's release of upbeat credit data late Friday. With Chinese trade and lending data showing signs of improvement for the world's second-biggest economy, investors are turning to the U.S. earnings season to confirm the resilience of corporate America in the face of numerous challenges to growth. JPMorgan Chase & Co. posted strong first-quarter results last week, and Bank of America Corp. is up on Tuesday. Central banks remain in the picture, with President Donald Trump renewing his attack on the Fed leadership over the weekend, saying the stock market would be "5,000 to 10,000" points higher had it not been for the actions of U.S. policy makers.
Yesterday, USDCAD climbed from 1.3308 up to 1.3396 (testing the weekly high) before falling back to hold a narrow 1.3365 – 1.3385 range for the balance of the session. The USD and JPY have broadly weakened today as global equity markets surge higher on the back of much stronger than expected trade data out of China (Exports: 14.2% exp 7.3% prev -20.8% / Trade surplus: $32.64 billion exp $7.05 billion prev $4.08 billion). The USD index has fallen towards a 2 week low while the JPY is nearing a 4 month low against the CAD. The AUD is the top performer today taking full advantage of the positive market sentiment nearing a 2 month high against the USD. The EUR is the 2nd best performer nearing a 3 week high against the USD after industrial production data was not as bad as initially feared (-0.2% exp -0.6% prev revised from 1.4% up to 1.9%). USDCAD began the day near 1.3380 and has fallen towards range lows near 1.3313. Oil prices have tested the $64.70 level for the 4th time this week and have again backed off sending USDCAD back up towards North American opening levels at 1.3338. The pairing has since eased lower towards 1.3320.
VBCE Daily Foreign Exchange Update for Thursday, April 11 2019
USDCAD spot rate: 1.3375 - 1.3380 (as at 7:18am PST)
Technical Support / Resistance:
Key Economic Data Releases:
-U.S. Initial Jobless Claims 196k (211k Exp.) 204k previous
-U.S. producer price index 0.6% (0.3% exp.) 0.1% previous
Consumer sentiment index
Treasuries ended a two-day rally and the dollar advanced as data confirmed the economy remains on solid footing at the same time inflation is muted. Stocks were mixed ahead of the start of earnings seasons. The 10-year Treasury yield rose toward 2.50 percent after data showed a strong U.S. labor market and tepid price gains, boosting confidence the Federal Reserve can remain in its patient stance toward rates. The pound fell as Prime Minister Theresa May accepted the European Union's offer to push the Brexit deadline out six months. The S&P 500 was little changed as it neared the key level of 2,900 and closed within 1.5 percent of its all-time high.
U.S. stocks edged higher, while Treasuries advanced as investors weighed key developments that continue to raise doubts about the strength of the global economy. The S&P 500 clung to a slight gain as an unexpectedly soft inflation reading potentially boosted the Federal Reserve's new wait-and-see approach to rate hikes. Minutes from the central bank's last policy meeting when it struck a freshly dovish tone are due today at 11am. Banking shares turned lower as heads of major lenders testified before a Congressional committee and the 10-year Treasury yield fell below 2.48%. The dollar gained versus the euro after the European Central Bank reiterated its warnings that global risks continue to batter the region's economy as it signaled no rate hikes for the rest of 2019. The pound advanced as the European Union looked likely to delay Brexit for up to a year at its emergency summit in Brussels. The weaker-than-expected inflation data heighten the attention that will be paid to the Fed's minutes, as investors try to gauge what it will take to budge the central bank out of its steady approach. But sentiment remains fragile after the ECB's and IMF's somber economic reports Tuesday, and amid an escalation of the U.S.-EU trade dispute while negotiations with China remain unsettled. Still, most see the world economy on a path of growth this year.
Stocks fell and Treasuries rose amid renewed concerns about slowing global growth and an escalation of trade tensions. The dollar dropped.The S&P 500 halted an eight-day rally with its steepest drop in two weeks as the Trump administration threatened tariffs on the European Union and the International Monetary Fund cut its global growth outlook to the lowest since the financial crisis. Multinationals bore the brunt of the selling, with Caterpillar and Boeing dragging the Dow Jones Industrial Average lower. Airlines tumbled along with materials and energy producers. Ten-year Treasury yields fell below 2.50 percent, while the greenback declined for a second day against major currencies. The pound was little changed as U.K. Prime Minister Theresa May met with key EU leaders on Brexit. In Asia, most equity gauges advanced.
U.S. stocks halted the longest rally since 2017 as investors awaited signs of progress in the trade war with China ahead of the latest corporate earnings season. Treasuries dropped, while West Texas crude hit a five-month high. The S&P 500 edged toward its first decline in eight sessions, as the post-Christmas rally stalled with the index about 1.5% from reclaiming its all-time high. Energy producers paced gains amid rising oil prices and the USD fell. Following a stellar first quarter across many asset classes, investors are assessing prospects for further gains as the U.S-China seem unable to come to a final decision on trade and earnings season gets underway. Despite a lack of details emerging from last week's discussions, Trump economic adviser Larry Kudlow said the two sides are closer to a deal, and that top-tier officials would be talking this week. A better U.S. jobs report Friday didn't stop President Trump from suggesting the Fed should cut interest rates. Elsewhere, the pound edged higher as British Prime Minister Theresa May appealed to both the public and politicians in search of support for a compromise Brexit plan.
Yesterday, USDCAD held a narrow 1.3343 – 1.3373 range – just below the weekly high and broken support level from last week. The pairing broke above the weekly high to 1.3386 ahead of this morning's release of the Canadian and U.S. jobs report. USDCAD initially dropped to 1.3358 before bouncing to 1.3403. The pairing has since moved back down to 1.3367 and bounced to 1.3385. The jobs data was mixed (U.S. recovered in the headline numbers but wage inflation was weak while Canada saw a minor loss after very strong gains previously while wage inflation climbed). The GBP initially gained on the day on reports that European Council president Tusk was proposing a 12 month Brexit extension. UK PM May later requested a Brexit extension to June 30th. The GBP has subsequently declined and is the worst performing currency on the day.
U.S. stocks pushed higher and the dollar strengthened as investors awaited further news from U.S.-China trade negotiations and key jobs data tomorrow in Washington. Speculation that President Donald Trump is likely to announce plans for a future summit meeting with President Xi Jinping of China to resolve remaining trade issues helped to send prices higher. Trump will meet with Chinese Vice Premier Liu He at the White House on Thursday, as negotiations over a trade deal between the world's biggest economies enter what could be the final stages. The deal being crafted would give Beijing until 2025 to meet commitments on commodity purchases and allow American companies to wholly own enterprises in the Asian nation, according to three people familiar with the talks
U.S. stocks advanced and bonds retreated globally as upbeat economic reports from China to Europe and renewed hopes for a Sino-U.S. trade deal attracted investors to riskier assets. The euro and pound strengthened. The S&P 500 climbed for a fifth day, equaling the longest winning streak in two months. The Dow briefly erased gains after a gauge of U.S. service industries fell in March by more than expected. The Stoxx Europe 600 index jumped after a string of economic reports from Italy to Germany eased concern over the euro area's growth outlook. The U.S. and China are making good headway in trade negotiations but unready to reach a deal and hope to get closer this week. In the U.K., the pound advanced after Prime Minister Theresa May announced a cross-party approach to break the logjam over Brexit.
U.S. equities pushed lower and European shares climbed as investors took stock of the strong rally that started the week. Treasuries also rose, while the pound weakened after Britain's parliament once again failed to reach a consensus on Brexit. The Dow was dragged lower by Walgreens Boots Alliance Inc. after lower pharmacy reimbrusements hurt earnings at the drugstore chain. Carmakers led the Stoxx Europe 600 Index toward the highest close this year. Asia's benchmark finished broadly unchanged as Japanese shares slipped and stocks in Shanghai and Seoul advanced. Most European bonds climbed and the common currency edged lower.
Stocks strengthened worldwide as strong manufacturing data out of the world's second largest economy helped ease investor worries about a slowdown in global growth. Treasuries extended losses after as a gauge of U.S. factories topped estimates in March. The S&P 500, Dow and Nasdaq were all in the green. The Stoxx Europe 600 Index climbed on the heels of its best quarter in four years after key China manufacturing PMI's for March beat the highest estimate in Bloomberg surveys of economists, indicating an acceleration in a key auto market. That's despite manufacturing data for Europe coming in at the lowest since 2013, which briefly caused the euro to pare some of its gains. In Asia, Chinese shares surged to the highest since May, while Hong Kong stocks entered a bull market. The yen declined, while the Turkish lira fluctuated as preliminary results from the weekend's municipal elections showed the popularity of President Recep Tayyip Erdogan is being tested. U.S.-China trade talks will resume when Vice Premier Liu He leads a delegation to Washington later this week, potentially offering more positive developments for investors. Elsewhere, the pound extended its gain as U.K. factory data reached a 13-month high on Brexit stockpiling and as lawmakers prepare to vote on alternative options to replace Prime Minister Theresa May's divorce plan.
Yesterday, USDCAD initially climbed from 1.3400 up to 1.3442 before falling back to 1.3396. The pair then rallied to a 3 week high of 1.3451 before falling back to 1.3427. Over the past week, the range has been just 1 cent (1.3353 – 1.3451). The CAD is the best performing currency today (and now for the week as well) boosted by a solid GDP report, a break back above $60 in oil, and soft U.S. data. USDCAD dropped from 1.3424 down to 1.3341 with corrective bounces limited to 1.3370 thus far.
U.S. stocks rose as the rally in Treasuries eased and investors looked to China for the latest developments in the standoff over trade. The dollar climbed.Consumer and technology companies led gains in the S&P 500 Index. Treasury 10-year yields rebounded from a 15-month low, while the greenback extended its advance into a third day. The pound slid after the U.K. Parliament rejected eight possible options for a new Brexit strategy. Traders are greeting the end of a strong quarter for risk assets amid mixed economic data. A report Thursday showed the world's largest economy cooled by more than initially reported in the last three months of 2018, signaling mounting challenges to the expansion as it nears a record duration. As U.S. officials arrive in Beijing for another round of negotiations for a comprehensive trade deal, analysts are saying investors shouldn't expect a major pact on China's yuan.
Steve Brown, Senior Corporate Trader | Stevebrown@vbce.ca
The CAD enjoyed a good start to the week reaching multi-week highs against most currencies. The TSX reached 6 month highs while oil prices gained 3% early in the week to send USDCAD from 1.3368 down to 1.3251 – a 3 week low. On Wednesday, USDCAD dropped from 1.3348 down to 1.3257 as the USD broadly weakened after the U.S. Fed held interest rates steady at 2.5% along with notable lowered economic projections. The Fed now anticipates just a single rate hike over the next 2 years after having raised rates 4 times in 2018. U.S. yields dropped sharply towards 15 month lows while commodities and equities climbed on "dovish" Fed statement and forecasts. USDCAD tested 1.3276 on Thursday before climbing to 1.3400 as the USD flows from Wednesday were largely reversed. USD gains continued Friday taking USDCAD from 1.3350 up to 1.3430. Canadian retail sales missed estimates while prior data was revised even lower. Canadian inflation data did move higher driven by higher energy prices. Overall, the CAD lost substantial ground during Thursday and Friday and ends up as the worst performing currency on the week behind the GBP. The JPY was the best performing currency this week propelled by the late risk-off attitude in the markets.
Garo Mavyan | Retail FX & Precious Metals Trader
Since Brexit became a political reality in 2016, UK Prime Minister Theresa May has struggled to succeed with her monumental task to negotiate the UK's withdrawal from the European Union. In November 2018, despite tense negotiations, it was announced that May and European leaders had agreed to a tentative withdrawal agreement. However, though it did help to momentarily ease market volatility, the optimism surrounding the agreement was short-lived. Members of the opposing Labour Party, and even dissenting members of May's own Conservative government, overwhelmingly expressed their objections. As expected, British lawmakers voted to reject the deal in January 2019. This handed May the dubious honour of suffering the biggest parliamentary defeat in modern British history. In a subsequent vote, the deal was rejected again, highlighting May's apparent incompetence to lead the Brexit movement. With no successes at home, she was forced to return to Brussels to attempt to rescue any chance of an orderly and smooth exit from the EU.