Wednesday February 21st

The USD is up slightly, equities oil and US treasury yields are hedging lower. The USD remains under some pressure trading near its lowest level in almost three weeks as traders await the release of the FOMC minutes for a fresh directional impetus. It’s generally expected that the Fed will eventually start easing mid year and market anticipates a total of four 25bps by the end of the year – underpinning the USD.

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In other news.? Zelenskyy says Ukrainian troops pulled back from strategic city in part due to a lack of ammunition. Canada has signalled it's prepared to get behind a Czech Republic initiative to ship tens of thousands of artillery shells from different countries. Iran accuses Israel of sabotage attack that saw explosions strike natural gas pipeline. World Food Programme stops deliveries to northern Gaza. U.S. plans sanctions against Russia over Alexei Navalny's death while France summons Russian ambassador and calls for an investigation.

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In currency news.?China's decision to lower its five-year Loan Prime Rate by 25 bps to support its economy might provide some support for the Euro, Chinese banks have approved property development loans of $17.20 billion as part of a special mechanism to inject liquidity into the sector. Thai central bank minutes show economic outlook uncertain, ready to adjust rates if significant change. Bank Indonesia holds rates, signals cut in second half. The CNY and JPY are flat, MYR is up 0.06%, TWD is down 0.23%, The AUD and NZD are both up 0.14 and 0.40% respectively. The trading currencies, MZN and ZAR are flat to start the day.

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In commodity markets.?Oil prices regained some ground in Asian trade amid concerns over attacks in the Red Sea and growing expectations that cuts to U.S. interest rates will take longer than thought. Oil prices trades down 0.56%, Nat Gas is down 0.83%, Gold and silver moves higher 0.25% and 0.47% respectively while copper is off 0.14%. Agricultural commodities are under pressure this morning with this morning Wheat trading .070% lower and soybean retreats 0.7%.

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The USD/CAD spiked higher after yesterday’s lower than expected inflation figures. In recent days, the USD/CAD haven’t been able to keep their gains after such move higher, we will have to see if this will repeat itself after the FOMC minutes are released. Canadian retail sales are set to be released Thursday.

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The EUR/CAD rallied significantly after yesterday’s CDN CPI figures. But seems to find some resistance at the open. Perhaps the FOMC minutes will stir things up.

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The EUR/USD faces challenges in extending its winning streak initiated on February 14 possibly due to market caution amidst diminished expectations for early interest rate cuts worldwide.

GBP/EUR snaps its five-day losing streak, edging lower on the back of positive comments from BoE’s Bailey. He acknowledged that investors speculating on interest rate cuts this year are not unreasonable. However, he emphasized indicators suggesting that the British economy was rebounding following a recession in late 2023. Bailey also noted that rate cuts could precede inflation dropping below 2%, though he refrained from providing a precise timeline.

The GBP struggles to hold onto gains. The upside move in the GBP/USD was inconsistent with the pace at which the USD fell due to Bailey dovish comments. ?