The Morning Update

Monday February 5th 2024

Written by:
Bernard Gauvin

The USD trades higher, equity markets and oil are off while us yields move higher. The dollar rose to a two-month high following Friday's blockbuster U.S. jobs report that far exceeded market expectations and sent U.S. bond yields soaring. Treasury yields rose further after Powell said the central bank could "give it some time" before cutting interest rates. The U.S. Senate unveiled a $118 billion bipartisan border security bill that would also provide aid to Ukraine and Israel, but it promptly slammed into opposition from the House of Representatives.

In other news. United States and Britain unleashed attacks against 36 Houthi targets in Yemen, a day after the U.S. military hit Tehran-backed groups in Iraq and Syria in retaliation for a deadly attack on U.S. troops in Jordan – with more to come. Zelensky confirms he’s thinking about dismissing the country’s military chief.

In currency news. China stocks fell again on Monday where the market lost 7.1% in the last 6 trading days. OECB raises the US Economy growth outlook while cutting the Euro zone. At the time of writing the CNY was down (0.08%), JPY was flat, MYR down 0.7% and TWD up 0.03% against the USD. The AUD hedges lower (0.15%) and NZD is up by 0.05%. and 0.10%. In the trading currencies, the MXN are both down 0.30%.

In commodity markets. Gold drops to one-week low as Fed rate cut hopes wane. Oil is presently trading down 0.2%, Nat Gas down 2.0%, Gold and silver are trading lower 0.44% and 1.28% respectively while copper is down 0.51%. Agricultural commodities hedging lower with Wheat trading down by 1.44% while soybean 0.25.

USD/CAD remains stronger on the back of last week’s US economic data and continued pressure on oil prices.

EURCAD is starting the week under pressure as German weak data is solidifying the view that the ECB will cut rate in April.

German exports fell 4.6% in December more than the expected 2%. This coupled with last week’s strong US employment figures is keeping the EUR under pressure.

The GBP/EUR if off last weeks high but remains higher than December’s high.

GBP remains under pressure as the strong US data suggest no-early cut in US rates while the poor economic prospect in the UK could force the BoE towards a loosening of policy.