Forex news for North American trade on March 12, 2021:
- Canada February employment +259.2K vs +75.0K expected
- U Mich March prelim consumer sentiment 83.0 vs 78.5 expected
- US tops 100m vaccine doses administered
- Baker Hughes US oil rig count 309 vs 312 expected
- Most of Italy to enter lockdown on rising cases
- ECB sparred over impact of US stimulus yesterday - report
- US PPI final demand for February YoY +2.8% vs 2.7% estimate
- Gold flat at $1721
- S&P 500 flat at 3940
- US 10-year yields up 9 bps to 1.63%
- WTI crude down 42-cents to $65.61
- CAD leads, NZD lags
The rise in Treasury yields had markets off balance coming into the day but this time was indeed different. A strong consumer sentiment report was a reminder of all the stimulus and reopening that's coming. Even as US 10-year yields rose above 1.62% to a pandemic cycle high, the jitters were minimal.
The main trade was to sell the US dollar and ignore the rise in yields, which is very counterintuitive to what's been the norm, and suggests that flows are flowing.
The Canadian dollar made a big move even as its commodity cousins struggled. The Feb jobs report was much stronger than expected with unemployment falling by a full point. USD/CAD initially dropped to 1.2510 from 1.2540 then had second thoughts and rebounded. But after Canadian 5y rates started to run, so did the loonie and then the dominoes fell through 1.25 and the Feb low of 1.2468.
Cable had been sold hard in Asia and Europe but came up for air to trim the daily decline by 60 pips. The euro made a similar move and is wrapping up the day at the US highs, though still below 1.20.
USD/JPY finished the day up 50 pips to 109.00 and tried the downside briefly but even on a day when the dollar was soft, it wasn't soft enough to fall against JPY.
Overall, it was a tough day to connect the dots and it will get even tougher in the run-up to Wednesday's FOMC.
What a ride it was this week. Have a great weekend.