- BoC July rate cut hopes downgraded.
- Lots of US data but little interest.
- US dollar inches higher in quiet overnight session.
USDCAD: open 1.3683, overnight range 1.3678-1.3713, close 1.3703, WTI $81.34, Gold, $2312.68
The Canadian dollar is trading like a tourist in Toronto reading a street map upside down. It doesn’t know whether it is coming or going, and its direction is tied to upcoming US data. But not today’s economic releases. Markets are not that interested in this morning's US data which includes Durable Goods Orders, Wholesale Inventories, Q1 GDP, and Initial Jobless Claims. However, that is only true if weekly jobless claims or GDP do not deliver big surprises either way.
The Canadian dollar remains on the defensive because economists expect the Bank of Canada to cut rates at least twice more in 2024. The latest inflation report downgraded the risk of a July rate cut, but whether it happens in July or September doesn’t change anything.
Oil prices shrugged off the latest Energy Information Administration data that showed US crude inventories rose by 3.59 million barrels in the week ending June 20. Analysts think the result is merely a blip as the US summer driving season will put a serious dent in inventories.
The US presidential election season shifts into high gear tonight as President Biden debates Donald Trump.
Wall Street closed on a positive note yesterday, but Asian and European markets are not experiencing similar joy. Japan’s Nikkei 225 index fell 0.82% while Australia’s ASX 200 index lost 0.30%. European bourses are all red, except for the German DAX index which has risen 0.19%. S&P 500 futures are up 0.15%. The US 10-year Treasury yield has climbed from 4.2460% yesterday in Asia to 4.331% in NY today.
EURUSD traded in a 1.0677-1.0702 range supported by Sweden’s Riksbank monetary policy decision. The bank left rates unchanged at 3.75% but indicated rate cuts were in the cards. Eurozone economic sentiment and business climate data had no impact.
GBPUSD climbed steadily in a 1.2613-1.2654 range. Traders ignored a warning in the BoE’s Financial Stability report, which said “there could be a sharp correction in asset prices that could ultimately make it more costly and difficult for UK households and businesses to borrow.”
USDJPY rallied from 160.43-160.81 due to contrasting BoJ and Fed interest rate outlooks. USDJPY bulls are also empowered by a lack of action by policymakers despite threatening intervention almost daily.
AUDUSD traded in a 0.6640-0.6673 band thanks to the recent spike in inflation which could force the RBA to raise interest rates
