The USD is up, oil prices ease, equity markets are down, and US yields are mixed on earnings and war fears. The USD rose towards 11-month highs, and precious metal prices gained after Israel's military briefly raided Gaza prompting investors to scramble for safe-haven assets. Equity markets remain under pressure as investors punished companies reporting weaker-than-expected earnings. Traders are "opting to sell first in fear that sentiment will get worse before it gets better", said De La Baume at BNP Paribas Suisse SA. The ECB is widely expected to keep interest rates unchanged today after ten consecutive increases, but many expect ECB President Lagarde will leave the door open for future rate hikes. Also in focus today, are the US GDP report, Initial Jobless Claims, Durable Goods Orders, Pending Home Sales, the ECB press conference, and the Fed's Waller speech, which will help provide intraday direction to currency markets.
In other news. Ford, UAW reach tentative deal to end labor strikes. Israel launches overnight raid in Gaza in preparation for "next stage". IBM software sales are up 8% as the company beats top and bottom lines. StanChart shares plummet on almost $1 billion hit from China exposure. Israel carries out 'targeted raid' against Hamas in Gaza. FTX founder Sam Bankman-Fried set to testify in criminal trial. In China Premier Xi tightens control over the financial sector as a new super-regulator takes shape. President Biden warned China not to attack the Philippines. UPS cuts annual revenue forecast on weak delivery demand.
In currency markets. Japanese Yen on intervention watch after it drops to a 1-year low vs. USD. Commodity currencies come under renewed selling pressure as risk sentiment sours, with AUD & NZD testing 1-year lows. CNY and Asian currencies weakened 0.1% on average vs USD. Trading currencies are steady with CHF, SEK & NOK falling 0.2%, JPY & MNX are down 0.1%, while ZAR, AUD & NZD are flat vs USD.
In commodity markets. oil prices fell by 0.8%, Natural Gas prices tumbled by 1%, Gold prices rose by 0.35%, Silver prices rallied by 1%, Copper prices strengthened by 0.7%, Wheat prices jumped 1.45% and Soybean prices firmed by 0.3%.
CAD extends its weakness vs USD setting fresh 7-month lows for the loonie as the combination of the BoC remaining sidelined, continuing weakness in oil prices, and souring risk mood amid increasing geopolitical concerns. The BoC kept interest rates at a 22-year high of 5%, as expected yesterday for a 2nd straight monthly meeting. Economists are predicting the BoC has ended its hiking cycle, with many economists anticipating the BoC will start to ease interest rates in Q2/24. Under the current geopolitical and economic environment we expect the CAD to remain under selling pressure towards 1.3860 next.
EURCAD consolidates heading into the ECB interest rate decision.
EUR steadies around 1.0550 ahead of the ECB policy announcements. Investors are sidelined ahead of the ECB interest rate decision today, where the central bank is expected to keep interest rates on hold at 4%. If President Lagarde acknowledges softening inflation and adopts a more concerned tone regarding the growth outlook across the Eurozone, this could be seen as dovish and put further selling pressure on the single currency. Alongside the ECB rate decision and statement, investors will also be focused on a flurry of US economic releases to help provide intraday direction to the Euro.
GBPEUR holds steady ahead of the ECB rate decision and US data releases.
GBP tests fresh multi-week lows, stalling below 1.2100 on souring risk sentiment amid increasing geopolitical concerns. The pound is pressured by risk aversion, amid escalating Middle East tensions and surging US bond yields which continue to boost the USD ahead of today's key US GDP release. The pound has dropped from 1.2300 to below 1.2100 since Thursday and opens the pound up to increasing technical selling targeting towards 1.1800 vs USD. The pound will be driven intraday by the US economic data results.
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