Canadian Dollar Update, May 12, 2021 – Canadian Dollar Rangebound Ahead of US CPI
USD/CAD Open: 1.2085-89, Overnight Range: 1.2084-1.2131, Previous Close: 1.2102
WTI Oil is at $66.34 and gold is at $1,824.30. US markets are lower today.
For today, USD resistance is at 1.2145. Support is at 1.2079.
• Headline US CPI expected to rise 0.2% m/m, Core CPI 0.3% m/m
• European Commission upgrades GDP forecast
• US dollar opens firmer ahead of US inflation data
The Canadian dollar rallied overnight, despite Australian and New Zealand dollar weakness, and was the best performing major G-10 currency against the US dollar. The greenback was cautiously bid as the US April inflation report looms.
Have FOMC officials peeked at today’s inflation numbers? US CPI is expected to rise 3.5% y/y, a tad above the Fed’s target of “inflation averages 2 percent over time and longer‑term inflation expectations remain well anchored at 2 percent”. Yesterday, a flock of Fed speakers, including Philadelphia Fed President Patrick Harker, and Atlanta Fed President Raphael Bostic, saying it was premature to start talking about tapering and that it was appropriate for monetary policy to remain in “accommodative mode.” Bond Traders may feel differently with an upside surprise to CPI.
Overnight, Asia equity indexes fell, following in the footsteps of Wall Street. Japan’s Nikkei lost 1.6%. European bourses traded better, helped by improving eurozone data. The UK FTSE 100 and German Dax indexes are higher. At 6:15 am ET, S&P 500 futures are in the red, gold prices are unchanged and WTI oil a tad higher. 10-year Treasury yields are steady at 1.615%.
EURUSD dropped to 1.2117 in Asia then rallied to 1.2150 in Europe before sliding to 1.2134 in NY, as traders jockey for position ahead of the US inflation report. EURUSD found support from firm Industrial Production data and upgraded EU Commission growth forecasts. The EU raised their 2021 GDP estimate to 4.3% and the 2022 GDP forecast to 4.4%. Both were previously estimated at 3.8%. The EURUSD uptrend from the beginning of April is intact above 1.2040, a level guarded by support at 1.2110.
GBPUSD price action tracked EURUSD moves in a 1.4109-1.4148 range with prices boosted by UK GDP results which rose 2.1% m/m in March. The results supported the Bank of England 2021 GDP forecast of 7.25%. Manufacturing and Industrial Production were higher than forecast. The GBPUSD outlook is bullish above 1.4100, looking for a test of 1.4250.
AUDUSD traded in a 0.7787-0.7843 range. Prices dropped on concerns that Australia’s latest budget will lead to a loss of its AAA rating.
The US inflation report is the only data of note today.
Today’s Suggested Range USD/CAD: 1.2040 – 1.2140