News & analysis


As Q1 comes to an end, the loonie looks to be one of the best performing currencies against a resurgent US dollar year-to-date. Economic events last week were light for the loonie, but that didn’t result in limited volatility in the USDCAD pair. The loonie’s main focus rested on oil markets, with the Suez canal debacle limiting losses in crude oil from rising inventories globally. This morning, with the Ever Given seemingly freed from the Suez canal’s shoreline, crude oil markets are trading on the back foot, which is weighing on the loonie at the margin. Oil markets will continue to be in focus, especially with OPEC+ set to meet on Thursday, while domestic data will also be in scope with January’s GDP report released on Wednesday.


Turmoil in US equity markets on Friday didn’t have too much of an impact on FX market price action, with the dollar closing the week out 0.76% higher over the course of the week against major peers as measured by the DXY index. Bill Hwang’s Archegos Capital Management company was at the source of a $20bn dump of stocks in Friday’s equity session as major banks liquidated positions to regain capital after a series of margin calls prompted a painful liquidation of the fund’s position. Goldman Sachs, having red-listed Hwang over a decade ago due to wire fraud charges imposed by the SEC, were at the epicentre of the firesale. At some point over the last few years, the major investment bank reopened their lines to Hwang’s business, but the exposure resulted in them selling over $10.5bn in equities on Friday alone. Equity markets this morning are still trying to gauge the collateral damage of this event, with companies tied to Archegos next in the firing line. US equity futures sit in the red for this reason, however, the impact is yet to be severe in FX markets. There is a mild risk-off mood around price action this morning, but this is likely due to a conglomerate of factors. Meanwhile, in Washington, rumours suggest President Bien will unveil plans for a major $3trn infrastructure-and-jobs program on Wednesday, and later in the week offer a glimpse of his 2022 budget. White House press secretary Jen Psaki suggested at the weekend that the plan is likely to be split into two separate bills; the first focused on infrastructure, the second in April focused on health and childcare. Focus will be on the progression of these bills, which many are suggesting could be passed by the August recess as signs of corporate tax hikes increase resistance from GOP lawmakers. Additionally, this week sees the release of February’s Nonfarm Payrolls data at a time when most of Europe enters into a long Easter weekend. Lighter liquidity conditions could spark greater volatility than usually expected around this release, especially with the Fed’s focus on the labour market recovery.


The euro also failed to escape the broader dollar strength and took no cues from ECB policy maker Isabel Schnabel’s speech late last week where she indicated the ECB may be even more dovish than their latest communication suggested. She stated the ECB won’t always wait for scheduled policy meetings if it needs to react with apt policy measures and it will pay close attention to the drivers behind changes in financing conditions and the speed of any shifts. The comments came after the ECB already signalled it will ramp up the speed of PEPP purchases and it did so in the last week. Today’s weekly report on bond-buying will reveal the extent to which the ECB will continue to front-load purchases. If the ECB keeps to its promise, net purchases will continue to be elevated to drive down the increase in eurozone bond yields, whereas any surprises to the downside will make the ECB’s verbal interventions lose value.


Sterling struggled to maintain at Friday’s levels this morning with USD regaining poise while concerns around falling UK exports to the EU are weighing on the pound, offsetting optimism about the progress of the UK’s economic reopening. The Financial Times reported the Bank of England is now demanding lenders to seek approval before relocating UK jobs or operations to the EU after concerns that European Central Bank policymakers are requesting more to move than necessary for financial stability. The move risks further inflaming tensions between the UK and EU at a time when negotiations over the post-Brexit relationship for financial services are sensitive and export controls for vaccines from the EU to the UK have been tightened. The government announced on Sunday the Moderna vaccine will be rolled out in the UK starting in April and ordered 17mln doses of the 2-shot vaccine. It is the third Covid-19 vaccine to be supplied to the UK after the Pfizer and Oxford shots. Today’s economic calendar is virtually blank, with Britons focused on the second week of lockdown restriction easing. Starting today, six people or two households can gather outdoors and outdoor sports facilities will be allowed to reopen.



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