Canadian Dollar Update – Canadian dollar counting down to Fed
USD/CAD Open: 1.3356-60, Overnight Range: 1.3344-1.3377, Previous Close: 1.3368
WTI Oil open at $67.98 and gold open at $1,963.21. US markets are higher today.
For today, USD resistance is at 1.3335. Support is at 1.3284.
- China’s PboC snips 1-week reverse repo rate.
- Risk sentiment improves on hopes for lower US inflation.
- US dollar opens lower as risk sentiment improves.
The Canadian dollar is directionless inside its well-traveled range ahead of today’s US inflation data and Wednesday’s FOMC decision.
US inflation is expected to have decreased further in May, which should ensure that the Federal Reserve leaves interest rates unchanged at tomorrow’s meeting. The May Consumer Price Index (CPI) is expected to be 0.2% month-over-month (m/m), compared to 0.4% in April., the CPI excluding food and energy is predicted to have dropped to 5.3% year-over-year (y/y) from 5.5% in May.
Global risk sentiment got a positive boost after the People’s Bank of China (PBoC) delivered a surprise 10 basis point cut to the 7-day reverse repo rate, dropping the rate to 1.90% from 2.0%, the first cut since August 2022.
The move fueled speculation that the longer term rates would also be cut this week as the Chinese government acts to boost domestic growth.
Asian equity markets closed with gains, led by a 1.80% rise in Japan’s Nikkei 225 index. European bourses showed mixed performance, hovering around unchanged levels, while S&P 500 futures were up by 0.12%. WTI oil prices rose 1.29% from Monday’s weak close, while gold prices increased by 0.36%. The yield on the US 10-year Treasury remained steady at 3.75%.
EURUSD traded firmly within a range of 1.0756-1.0810, driven by improved risk sentiment ahead of the US inflation data release. German CPI for May came in as expected at 6.1% y/y, but the focus remained on the US inflation numbers.
GBPUSD recovered from yesterday’s losses and rallied from 1.2512 to 1.2576 following strong employment data. The unemployment rate ticked down to 3.8%, nearing an all-time low, while wages experienced significant growth. Average earnings, including bonuses, rose by 6.5% (3-month, y/y), up from the revised figure of 6.1% (previously 5.8%). Average earnings excluding bonuses increased by 7.2% (forecasted 6.9%). The Bank of England is already expected to raise rates by 25 basis points on June 22, and this data suggests a likely rate increase in August as well.
USDJPY fluctuated within a range of 139.34-139.66. The Bank of Japan’s (BoJ) monetary policy meeting is scheduled for Friday, with no anticipated changes in rates or policy.
AUDUSD traded in a range of 0.6739-0.6786. The negative sentiment following weaker-than-expected Westpac May Business Conditions index (actual 8, compared to April’s 15) and Business Confidence (actual -4, compared to May’s 0) was offset by news of the PBoC trimming its 7-day reverse repo rate.