Canadian Dollar Update, June 9, 2021 – Canadian Dollar Supported by Higher Oil Prices
USD/CAD Open: 1.2086-90, Overnight Range: 1.2078-1.2115, Previous Close: 1.2117
WTI Oil is at $69.64 and gold is at $1,893.20. US markets are mixed today.
For today, USD resistance is at 1.2135. Support is at 1.2084.
• WTI oil surges to $70.60/b overnight
• BoC meeting ahead
• US dollar opens modestly lower, CAD unchanged
The Canadian dollar is riding a see-saw. USDCAD rose from 1.2070 to 1.2117 yesterday, then reversed the entire move overnight and in early Toronto trading. A surge in West Texas Intermediate (WTI) oil prices to $70.60 from $68.35 yesterday helped drive USDCAD lower, as did broad US dollar weakness vs the majors.
The April Bank of Canada meeting sparked the USDCAD drop from 1.2650 to 1.2015 by the middle of May.
Today’s BoC meeting will not result in a similar move. The BoC is universally expected to leave the overnight rate unchanged at 0.25%, or change the guidance for an interest rate hike.
The BoC announced the tapering QE bond purchases to $3.0 billion per week at the previous meeting. Recently, a couple of strategists at Canadian banks noted that the BoC was not purchasing the full $3.0 billion, which may be a sign the BoC will announce more tapering soon.
WTI oil didn’t meet with any resistance at the $70.00/b level, and prices climbed steadily until running out of steam at $70 60/b. Traders believe demand will continue to increase as the G-7 economies begin to normalize following the pandemic. Oil prices garnered additional support as the Iran/US, and EU nuclear treaty talks appear to have stalled.
The China Purchasing Price Index leapt to 9.0% in May, from 6.8% in April, while CPI rose 1.3% from 1.2% y/y. Those results kept the focus on Thursday’s US inflation data.
The US inflation report is garnering outsized attention. It is expected at 4.4% y/y compared to 4.2% last month. A higher than forecast result will reignite the debate about the Fed needing to raise interest rates sooner than forecast. Fed Chair Powell and most of his colleagues insist that inflation gains are temporary. However, some FOMC and Treasury Secretary Janet Yellen have speculated that a rate hike is not out of the question.
EURUSD and GBPUSD inched higher overnight but are well within recent ranges. The EU and UK data calendar was light, and traders are content to await tomorrow’s US data.
AUDUSD and NZDUSD tracked broad US dollar moves. AUDUSD traders ignored the drop in Westpac Consumer Confidence as it was due to coronavirus lockdown measures in Melbourne.
There are no economic reports from the US or Canada today.
Today’s Suggested Range USD/CAD: 1.2040 – 1.2140