The Morning Update

The USD is steady, oil prices slipped, equity markets are mixed, and US yields rise with central banks in view this week. Currency markets are steady ahead of Fed Chair Powell's testimony before the Senate committee, the Fed Beige book, BoJ Governor Ueda comments, and the ECB & BoC interest rate decisions this week. Equity markets appear to be pausing near record highs as investors await reassurance that central banks remain on track to cut interest rates into summer. Markets expect the European Central Bank and the Bank of Canada to keep their interest rates on hold in their respective meetings this week. Elsewhere, oil prices remain near their highs after OPEC+ extended voluntary oil output cuts of 2.2 million barrels per day into Q2, which aligns with expectations. Bitcoin extends gains near fresh record highs on continued EFT demand. Today sees limited economic releases, so the focus will be on Fed Speaker Harker to help provide intraday direction to the USD. In Focus this week, Tuesday Japan, China. Eurozone CPI, China 14th National People's Congress. Wednesday Australia GDP, UK annual Budget, Eurozone CPI & Fed issues Beige Book survey, BoC Interest Rate decision. Thursday, ECB Rate Decision, Fed Chair Powell's testimony, President Biden's State of the Union address. Friday, Eurozone GDP & US NFP & Unemployment data.

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In other news. China cancels the premier's press conference for the first time since 1993. XI resists market pressure to step up China's stimulus efforts. US VP Harris urges Hamas to agree to an immediate ceasefire and pushes Israel on aid to Gaza. Kremlin says German recording shows intent to strike Russia, asks whether Scholz is in charge. China's Country Garden faces heat from liquidation suit to get cracking on debt revamp talks. SpaceX launches eighth long-duration crew for international space orbit. Le Pen launches a European election campaign with a swipe at the "authoritarian" EU. The average Canadian pays 61 times more for mobile data than people in Italy: Study. A state of emergency is declared in Haiti after jailbreaks.

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In currency news. Currency markets are steady ahead of a busy week with Central Bank Rate decisions, Super Tuesday in the US, a State of the Union, and the Nonfarm payrolls data release. CNY slips 0.1%, while Asian currencies firm 0.1% on average vs USD. Trading currencies are mixed, with SEK weakening 0.35%, NZD, NOK & JPY down 0.2%, while AUD, CHF & MXN are flat, and ZAR strengthening 0.3% vs USD.

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In commodity markets. Oil & Gold prices slipped by 0.2%, Natural Gas prices rallied by 5.5%, Silver prices are flat, Copper prices firmed by 0.55%, Wheat prices dropped 0.7%, and Soybean prices gained by 0.7%.

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CAD continues to hold within a narrow trading range, just off near 3-month lows as the loonie consolidates ahead of the Bank of Canada's interest rate decision on Wednesday. Markets expect the BoC will keep interest rates on hold at 5% at their Wednesday meeting, with BoC's officials saying it is still too early to begin talking about lowering interest rates. Market analysts have pushed back expectations of a BoC rate cut to June as high inflation levels persist. Sunday's decision by OPEC to extend their supply cuts into Q2/24 should help provide an underlying support for the loonie. With the lack of data releases, we expect the loonie to remain within its current trading range.

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EURCAD continues to rise to a fresh three-month high as the ECB's hawkish tones support the single currency.

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EUR edges higher, breaching 1.0850 after better-than-expected domestic data. Euro edges higher after Eurozone Sentix Investor Confidence improved to -10.5 in March. We anticipate the gains will be limited as investors remain cautious heading into Fed Chair Powell's Testimony, the ECB interest rate decision on Thursday, and the US Nonfarm Payroll data out on Friday. In the Monetary Policy Report published on Friday, the Fed said that inflation expectations were broadly consistent with the 2% target. It reiterated that it would be inappropriate to reduce the policy rate until policymakers have greater confidence that inflation will move sustainably toward the goal. Intraday, with the lack of high-tier US economic releases, we expect the Euro to remain capped at 1.0900.

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GBPEUR bounces off 7-week lows as focus shifts to the UK budget out on Wednesday.

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GBP edges higher in early trading as the USD consolidates ahead of a busy week of key data releases. The pound edges higher on improving risk sentiment, while the USD is sidelined heading into Fed Chair Powell's testimony and Friday's crucial Nonfarm Payment report. Domestically, investors will be focused on Jeremy Hunt's budget, which is expected to attempt to balance long-term tax cuts while looking at some revenue-raising strategies, which could include a rise in passenger duty for business travel. Today, we expect the pound to hold below 1.2700 with the light economic releases.