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The US dollar started the day on the back foot but managed to recover the ground lost during US trading hours. The EUR/USD pair is trading at around 1.0940, while GBP/USD changes hands at 1.3035.
Economic Data
Canada’s benchmark index extended losses for a third straight session on Tuesday, as weakness in energy and metal prices due to rising COVID-19 cases in China weighed on commodity stocks.
The Toronto Stock Exchange’s S&P/TSX composite index was down 161.23 points, or 0.76%, at 21,019.55. The energy and materials sectors fell 4.4% and 1.4% respectively, tracking weakness in commodity prices.
The Producer Price Index (PPI) for final demand rose to 10% on a yearly basis in February from 9.7% in January, the data published by the US Bureau of Labor Statistics announced on Tuesday. This reading matched the market expectation.
Annual Core PPI, which excludes food and energy prices, edged higher to 8.4% from 8.3% but this print came in lower than analysts’ estimate of 8.7%.
Other Developments
President Vladimir Putin said Kyiv is not serious about finding a mutually acceptable solution. The news cooled hopes for a diplomatic agreement. Earlier in the day, Ukraine President Volodymyr Zelenskyy’s adviser said they were confident they could reach a diplomatic solution in the next few weeks.
Beyond sanctions, Russia submitted a request to leave the Council of Europe after being suspended on February 25. Additionally, Moscow announced a series of sanctions on US authorities, including President Joe Biden and banned Canadian Prime Minister Justin Trudeau from entering the country.
European Central Bank President Christine Lagarde spoke at the WELT Economic Summit and noted that the uncertainty surrounding the economic outlook had increased dramatically, as the war would reduce growth and create inflation due to increasing energy and commodities costs. She also said that inflation is still forecast to decline gradually and settle near the central bank’s 2% target by 2024.
China announced record coronavirus contagions and put over 17 million people into strict lockdown, dampening economic growth expectations. Stocks and commodities were on the back foot amid concerns related to decreased demand throughout the first half of the day.
Tesla is raising prices for its entire electric car lineup – a move that came days after CEO Elon Musk warned the firm was under “significant” inflationary pressure given the rising cost of key commodities following the Russian invasion of Ukraine.
Gold bottomed at $1,907.04 a troy ounce, bouncing modestly ahead of the close to settle around $1,920 a troy ounce. Crude oil prices extended their latest decline, and WTI ended the day at $96.50 a barrel.
Wall Street posted substantial gains despite mounting concerns related to the Russia-Ukraine crisis. US government bond yields were up, with the yield on the 10-year Treasury note reaching a multi-week high of 2.169% and finishing the day nearby.
The AUD/USD pair spent the day inside a tight range, ending little changed sub-0.7200. The Canadian dollar benefited from falling oil prices and soaring commodities, resulting in USD/CAD falling to 1.2766.
FOMC In Focus
The market’s focus shifts now to the Federal Reserve, as the US central bank will announce its monetary policy decision on Wednesday and is expected to trigger a rate hike of at least 25 bps.
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