North American Summary and Highlights 6 Mar
Overview - The USD weakened on Fed’s Powell’s testimony most notably versus the CAD after the BoC signaled it was not ready to cut rates.
North American session
The USD fell back through the North American session as the market took the testimony from Fed chair Powell as being on the dovish side of expectations. Even though we saw his comments as being if anything slightly hawkish relative to market pricing, US yields fell back slightly in response to his saying rate cuts this year were likely, and the USD fell back in line. EUR/USD traded up above 1.09, gaining around 30 pips on the session, and USD/JPY fell around half a figure to 149.30. The USD edges marginally off its lows in late trade, but remained down on the day.
The CAD was the strongest performer on the session, with USD/CAD falling nearly a big figure to 1.35 after the BoC left rates unchanged and governor Macklem indicated that it was still too early to ease policy.
US ADP employment and JOLTS job openings data were not far from expectations. The Fed’s Beige Book saw slightly stronger growth in activity, but some easing of inflationary pressures.
European morning session
The USD was generally weaker through the European morning, with the JPY and the European currencies generally gaining ground. The JPY started the session the strongest, benefiting from press reports that some BoJ board members will say that exiting the negative interest rate policy (NIRP) at the March meeting would be “reasonable”. USD/JPY dropped around half a figure on this news, but recovered most of the decline by the end of the morning, finishing only around 10 pips below opening levels near 149.75.
After initially lagging behind the JPY gains, the EUR finished up outperforming, gaining around 20 pips on the session to 1.0875. The EUR may have benefited from the German trade data released early in the session, which showed a sharp rise in both exports and imports in January, but with exports outperforming and taking the trade surplus to a new all time high of EUR27.5bn. The Eurozone retail sales data came in as expected at 0.1% m/m in January.
The CHF underperformed the other European currencies, with EUR/CHF rising to another new 3 month high of 0.9630.