USDCAD open 1.3727, overnight range 1.3724-1.3757, close 1.3754, WTI 68.50, Gold 3352.36
The Canadian dollar is inching higher as market sentiment continues to brighten globally, though the move may not hold. The underlying reasons that lifted the US dollar earlier this week remain intact. The Federal Reserve is unlikely to ease monetary policy in the near term, regardless of what Trump or Governor Waller might imply. The greenback continues to draw support from solid US economic performance and growing optimism that the ongoing trade tensions may see resolution.
Canadian dollar downside could be tempered by expectations that the Bank of Canada will keep interest rates unchanged at its July 30 meeting.
Oil prices traded between $67.43 and $68.57. Analysts at Standard and Chartered Bank believe the market is overstating how much spare capacity OPEC actually has, a miscalculation that could leave room for crude to climb another $15 per barrel.
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Fed Governor Christopher Waller delivered a speech in New York yesterday titled “The Case for Cutting Now,” He laid out three points to support his view. First, he downplayed the inflationary impact of tariffs, calling them one-off price level shifts rather than persistent inflation drivers. Second, he argued that a range of recent data points to a policy stance that should be neutral rather than restrictive. Third, he cast doubt on the strength of the labor market, citing expected revisions and slowing private-sector hiring as signs of emerging weakness.
Other policymakers, including John Williams, Mary Daly, and Adriana Kugler disagreed and prefer an unchanged monetary policy stance.
Asian equity markets closed higher led by Australia’s ASX 200 which rose 1.37%, Japan’s Topix was the exception and inched down 0.19%, as traders braced for this weekend’s Upper House election.
EURUSD edged higher overnight, climbing from 1.1593 to 1.1646. The pair is likely to encounter resistance around 1.1660, especially with the “fire Powell” noise fading and recent US data weakening the case for imminent rate cuts. Retail Sales came in stronger than forecast, while jobless claims were lower than expected.
GBPUSD is trading near the top of its overnight range of 1.3405 to 1.3457 benefiting from a generally softer US dollar. Sterling also found a bit of support after Goldman Sachs suggested the Bank of England may adopt a slower pace of easing after it cuts rates by 25 basis points on August 7.
AUDUSD maintained a firm tone, sitting near the top of its 0.6482 to 0.6523 range. Support came from a mix of rising risk appetite, dovish comments from most Fed officials (Waller excluded), and strength in commodity prices, particularly iron ore.
Today the US releases Building Permits, Housing Starts, and the Michigan Consumer Sentiment data.
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