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Citizens Foreign Exchange: Your Foreign FiX for Thursday, April 25 |
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Your Foreign FiX
Thursday, April 25, 2024 |
| The US Dollar is trading higher this morning, following several economic reports, that show slower growth and higher inflation. Q1 GDP was 1.6%, versus 2.5% expected, while the core PCE price index rose to 3.7%, three tenths higher than expected. Personal consumption rose 2.5%, weaker than than the 3% expected, while jobless claims dropped to 207,000, better than expected. These are Fed unfriendly numbers and will provide more cover for the hawks to delay potential rate cuts. US interest rates are trading much higher across the curve, with the 2-year and 10-year up 5.5-bps and 5-bps respectively. The OIS market has reduced the chance for a Fed June 25-bps cut to just 8%, while September has fallen to 74%, down from 88%, before the numbers. The Bloomberg Dollar index is trading just below the 1,263 level, up 16-bps from yesterday and unchanged from one week ago. Stronger than expected US economic data and sticky inflation continue to provide a tailwind for the Dollar. | |
| Canada: The Canadian dollar is trading higher on Thursday as the country’s 10-year yields firm and industrial metal prices climb amid optimism about a potential economic recovery in China. USDCAD fell 0.2% to just above 1.3680 as of 8:30 am EST; a drop below 1.3655 would be a two-week low. WTI crude futures climbed 0.2% to $82.98 per barrel. Copper prices are near a two-year high following a report that BHP Group LTD proposed a takeover of Anglo American that values the smaller miner at $38.9 billion, in a deal that would create the world’s top producer of the metal. USDCAD one-month implied volatility is at 5.135%, up from 5.1175% on Wednesday. The US two-year yield exceeds its Canadian counterpart by 63.8bps, down from 64.6bps on Wednesday and a two-week low. The 10-year yield spread is 83.9bps in favor of US vs 84.7bps in favor of US the previous session. Bank of Canada officials said monetary policy easing is expected to be “gradual” as they debate the timing of a pivot to rate cuts, according to central bank minutes released Wednesday. No major economic data is scheduled for today. Support comes in at 1.3647 and resistance at 1.3855. | |
| Europe: The euro rose slightly overnight to trade back above the 1.07 level as tech earnings dragged equities and the dollar lower. Today, US GDP data is expected to show economic growth cooling from 3.4% to 2.5%, but still may show persistent inflationary pressures. Any downside surprises could adjust market expectations for Fed rate cuts earlier. Most ECB officials see June as the first rate cut, however their level of conviction differs and the future rate path beyond June comes with much disagreement. ECB Muller spoke in the European session saying he is not in favor of lowering borrowing costs for a second straight meeting following the expected cut in June; “it’s natural to move at a moderate pace with careful steps.” Villeroy is convinced they shouldn’t “concentrate” cuts at quarterly meetings. Kazaks believes it is still too early to declare victory over inflation while Lagarde warned that the investment landscape is not living up to what is needed. Expected elevated market volatility today based on US data and how that may change market expectations for Fed rate cuts. |
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Your Foreign FiX
Thursday, April 25, 2024 |
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| The US Dollar is trading higher this morning, following several economic reports, that show slower growth and higher inflation. Q1 GDP was 1.6%, versus 2.5% expected, while the core PCE price index rose to 3.7%, three tenths higher than expected. Personal consumption rose 2.5%, weaker than than the 3% expected, while jobless claims dropped to 207,000, better than expected. These are Fed unfriendly numbers and will provide more cover for the hawks to delay potential rate cuts. US interest rates are trading much higher across the curve, with the 2-year and 10-year up 5.5-bps and 5-bps respectively. The OIS market has reduced the chance for a Fed June 25-bps cut to just 8%, while September has fallen to 74%, down from 88%, before the numbers. The Bloomberg Dollar index is trading just below the 1,263 level, up 16-bps from yesterday and unchanged from one week ago. Stronger than expected US economic data and sticky inflation continue to provide a tailwind for the Dollar. | |
| Canada: The Canadian dollar is trading higher on Thursday as the country’s 10-year yields firm and industrial metal prices climb amid optimism about a potential economic recovery in China. USDCAD fell 0.2% to just above 1.3680 as of 8:30 am EST; a drop below 1.3655 would be a two-week low. WTI crude futures climbed 0.2% to $82.98 per barrel. Copper prices are near a two-year high following a report that BHP Group LTD proposed a takeover of Anglo American that values the smaller miner at $38.9 billion, in a deal that would create the world’s top producer of the metal. USDCAD one-month implied volatility is at 5.135%, up from 5.1175% on Wednesday. The US two-year yield exceeds its Canadian counterpart by 63.8bps, down from 64.6bps on Wednesday and a two-week low. The 10-year yield spread is 83.9bps in favor of US vs 84.7bps in favor of US the previous session. Bank of Canada officials said monetary policy easing is expected to be “gradual” as they debate the timing of a pivot to rate cuts, according to central bank minutes released Wednesday. No major economic data is scheduled for today. Support comes in at 1.3647 and resistance at 1.3855. | |
| Europe: The euro rose slightly overnight to trade back above the 1.07 level as tech earnings dragged equities and the dollar lower. Today, US GDP data is expected to show economic growth cooling from 3.4% to 2.5%, but still may show persistent inflationary pressures. Any downside surprises could adjust market expectations for Fed rate cuts earlier. Most ECB officials see June as the first rate cut, however their level of conviction differs and the future rate path beyond June comes with much disagreement. ECB Muller spoke in the European session saying he is not in favor of lowering borrowing costs for a second straight meeting following the expected cut in June; “it’s natural to move at a moderate pace with careful steps.” Villeroy is convinced they shouldn’t “concentrate” cuts at quarterly meetings. Kazaks believes it is still too early to declare victory over inflation while Lagarde warned that the investment landscape is not living up to what is needed. Expected elevated market volatility today based on US data and how that may change market expectations for Fed rate cuts. |
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Percentage Change |
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1M |
3M |
6M |
9M |
12M |
24M |
USDCAD |
0.97% |
2.14% |
-0.98% |
0.93% |
0.22% |
5.20% |
USDCNH |
0.04% |
1.07% |
-0.45% |
-0.54% |
2.44% |
8.44% |
EURUSD |
-0.64% |
-1.40% |
0.49% |
-1.40% |
-0.05% |
1.87% |
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Annualized Forward Differential |
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1M |
3M |
6M |
9M |
12M |
24M |
USDCAD |
0.50% |
0.56% |
0.96% |
0.67% |
0.68% |
0.63% |
USDCNH |
1.72% |
1.76% |
2.98% |
2.11% |
2.18% |
2.06% |
EURUSD |
1.44% |
1.56% |
2.48% |
1.75% |
1.77% |
1.79% |
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Implied Volatilty |
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3M |
6M |
9M |
12M |
24M |
6M-RR |
USDCAD |
5.24% |
5.42% |
5.71% |
5.74% |
5.85% |
0.62% |
USDCNH |
3.92% |
4.72% |
5.53% |
5.86% |
6.18% |
0.39% |
EURUSD |
6.11% |
6.26% |
6.55% |
6.63% |
6.77% |
-0.65% |
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| Loonie Gains As Yields, Metals Offer Support |  | | | | | EURUSD Higher Ahead of US GDP |  | | |
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| Read our technical documentation to learn more about this data. |
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