Canadian Dollar Update – Canadian dollar hanging tough

• European leaders/Trump meeting ends on a positive note
• FOMC minutes due Wednesday
• US dollar opens rises gently in uninspired trading.

USDCAD open 1.3820, overnight range 1.3797-1.3823, close 1.3803, WTI 62.07, Gold 3339.50

The Canadian dollar bounced around in a narrow range with price action tracking broad US dollar moves, against the majors. The meeting between Trump and European leaders provided a distraction yesterday and raised hopes for American security guarantees for Ukraine.

Canada’s inflation news is the big story for Canadian dollar traders. CPI is expected to have cooled slightly in July, rising 1.7% y/y compared with 1.9% in June. Market reaction is likely to be restrained, with another inflation print due before the next Bank of Canada decision. Furthermore,  traders are cautious ahead of Powell’s Jackson Hole remarks on Friday.

WTI oil traded in a 61.88-62.67 band, pressured by fears that a ceasefire could lead to an easing of Russian export sanctions and increase supply.

Markets tracked the headlines from Trump’s meeting with European leaders, but attention stayed on whether Fed Chair Powell would use his Jackson Hole address to signal a policy shift. Investors are betting he won’t wait for more soft labour data and instead will hint at rate cuts starting September 17. Traders also expect the FOMC minutes due tomorrow to offer insight into the Fed’s level of concern about the jobs outlook.

Asian equities closed weaker. Australia’s ASX 200 fell 0.70%, Japan’s Topix slipped 0.14%, and Hong Kong’s Hang Seng lost 0.21%. By 7:00 am, European markets were more upbeat. The CAC-40 gained 0.72%, the DAX rose 0.22%, and the FTSE 100 matched the 0.22% increase. Meanwhile, S&P 500 futures slipped 0.14%, the 10-year Treasury yield held at 4.33%.

EURUSD traded in a 1.1639-1.1692 range, recovering some of yesterday’s losses as positioning built ahead of the FOMC minutes and Powell’s speech. The rebound may be short-lived as inflation data suggests Powell can defend leaving policy unchanged.

GBPUSD traded in a 1.3487-1.3535 range and is near the top of that band in early New York dealings. The August uptrend remains intact as long as prices hold above 1.3480.

USDJPY traded in a 147.54-148.11 band with little conviction as traders awaited fresh catalysts. The pair drew some support from U.S. yields after the 10-year Treasury ticked up to 4.347% from 4.28% the previous session.

AUDUSD traded in a 0.6477-0.6498 range, supported by an improvement in consumer sentiment. Westpac’s Confidence Index rose 5.7% in July to 98.5, but with the figure still below 100, pessimism continues to outweigh optimism.

US Housing Starts and Building Permits data is on tap.