USD/CAD - Canadian Dollar Pops Higher

The Canadian dollar turned yesterday’s frown upside down. Yesterday, U.S. Treasury Secretary Janet Yellen warned in remarks to "The Atlantic", "It may be that interest rates will have to rise somewhat to make sure our economy does not overheat, even though the additional spending is relatively small relative to the size of the economy." That wasn’t what markets wanted to hear. Stocks plunged, and the U.S. dollar soared. The news alarmed the Biden Administration, and Ms Yellen was quick to offer a clarification. She told the Wall Street Journal that all she was really saying was that any near-term inflation increases would be temporary as they are due to supply chain bottlenecks. Stock prices recovered somewhat. The Dow Jones Industrial Average finished flat, while both the NASDAQ and S&P 500 closed with losses. Mainland China and Japanese equity markets remained closed for holidays. Australia’s ASX 200 index closed with losses while the Hong Kong Hang Seng posted a gain. European indexes are higher with the German Dax posting a 1.33% gain. EURUSD dropped to $1.1987 from $1.2026, suffering from modestly weaker than expected data. Composite and Services final PMI readings in Germany, France, and Italy, missed forecasts. The short-term EURUSD outlook is for a test of support at $1.1950. GBPUSD climbed to$1.3925 from $1.3878, supported by EUR/GBP selling. Traders are keeping an eye on he Scottish elections. GBP/USD needs to break above resistance in the 1.3960 area or risk a retest of $1.3800. AUD/USD is trading at the top of its $0.7706-$0.7740 range, underpinned by positive economic data and higher commodity prices. NZD/USD climbed to $0.7191 from $0.7145, following a better than expected employment report. Jobs increased 0.6% q/q in Q1 compared to the forecast of a 0.2% rise. Oil prices jumped again. WTI rallied from $64.95 yesterday morning to $66 63 in New York, fueled by a sharp 7.7 million barrel decline in U.S. crude inventories for the week ending April 30. The Canadian dollar is in demand due to higher crude prices and expected spillover benefits from a post-pandemic U.S. economic boom. Today’s data includes ADP employment report, and the ISM Serves Purchasing Managers Index data. Bank of Canada Governor Tiff Macklem speaks at 11:00 am ET. Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
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