Putin was not particularly ‘flagrant’ during his press conference this morning, and Russian troops have ended their military exercises in Ukraine for now. Consequently, conditions moved back into ‘risk-on’ during the London morning. In FX, this shift provided a bid in USDJPY, GBPUSD, EURUSD and EURCHF, and we currently expect that bid to persist through the bulk of the North American session. EURUSD will also be helped by rising bank shares, but the most likely outcome for the pair today will probably be to see offers in front of 1.380, and very limited interest to be long of EURs 1.380-1.383. The pair should continue to ‘flush out’ what’s left of the Ukrainian premium, and discount Draghi’s dovish comments yesterday at the same time.
USDCAD will remain muted in front of the BoC tomorrow and more key data on Friday, with the same general levels dominating the picture: 1.115 capping topside and 1.1025-1.105 acting as a floor underneath.
Our economists are expecting a similar tone in the March BoC statement to the one released in January. This should continue to see support from medium-term buyers in USDCAD emerging on dips, but an unchanged statement relative to January will not be enough on its own to spark a move back up to the 1.119-1.1225 range yet. This fact and short CAD positioning could leave USDCAD open to a CAD short squeeze ahead of tomorrow, and CAD shorts above 1.110 may find themselves particularly vulnerable. 1.100-1.1025 appears the better range to look to buy for now.
Read the full report: FX Daily
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