Canadian Dollar Update – Canadian dollar recoups losses
USD/CAD Open: 1.3458-62, Overnight Range: 1.3450-1.3492, Previous Close: 1.3467
WTI Oil open at $70.90 and gold open at $2,009.35. US markets are mixed today.
For today, USD resistance is at 1.3490. Support is at 1.3427.
- Eurozone, UK, and Chinese data all disappoint.
- Canada April inflation ahead.
- US dollar inches lower on profit-taking.
The Canadian dollar shrugged off yesterday’s early morning selling pressure and staged an impressive rally. Of course, the move had nothing to do with any domestic factors and was sparked by a modest improvement in global risk sentiment.
Domestic data takes center stage today. April CPI is due, and the headline number is expected to dip to 4.1% y/y vs March 4.3% y/y. The more important Core-CPI is forecast at 3.9% y/y compared to 4.3% in March.
If the data is as expected, it would reinforce the Bank of Canada’s decision to pause rate hikes. However, falling oil prices will likely be the cause of the decline and recent developments suggest oil prices may not fall much further.
Many analysts are concerned that falling inflation may be temporary as there is still a lot of pent-up demand in services and housing prices are on the rise.
West Texas Intermediate traded choppily in a $70.57-$71.75 range, supported by news that the US Department of Energy plans to buy 3.0 million barrels of crude for delivery by August, to start replenishing the Strategic Petroleum Reserves.
EURUSD is grinding out gains in a 1.0864-1.0904 band although weak German and Euro zone ZEW data is acting as a drag on upside moves.
GBPUSD sank then soared in a 1.2467-1.2545 range. A weaker than expected UK employment report (claimant count change 46.7k) and a slightly higher unemployment rate-3 months-to-March (actual 3.9% vs 3.8%) drove prices lower.
USDJPY meandered in a 135.70-136.10 band with the US 10-year Treasury yield drifting between 3.474-3.508%. The dovish BoJ outlook limits downside moves.
AUDUSD traded negatively in a 0.6667-0.6708. Prices were affected by poor domestic and Chinese data. Chinese retail sales and industrial production data disappointed.
Westpac Consumer Sentiment survey fell by 7.9%, from 85.8 in April to 79.0 in May. It is the lowest reading since the 2020 COVID outbreak. The RBA’s surprise rate hike is blamed for the poor showing. The RBA minutes reaffirmed that the rate hike was due to sticky inflation.
Today’s key US data release is Retail Sales (forecast 0.7% m/m (previous -0.6%), Retail Sales ex-autos (forecast 0.4% vs previous -0.4%). A higher than expected result will show that consumers still drive economic growth.