– Loonie recoups all of Friday’s losses, and then some.
– Risk sentiment turns positive on downgraded Fed hike speculation
– US dollar opens sharply lower, AUD gains 1.42
USDCAD Snapshot open 1.2965-69, overnight range 1.2966-1.3023, close 1.3023, WTI oil $99.27, Gold $1722.16
The Canadian dollar fell off a cliff Friday but rebounded like it was on a bungie cord today. USDCAD appeared to be on the verge of a moonshot with prices reaching 1.3224 on Thursday after hotter than expected US inflation data.
The rally was derailed when Fed policymakers pushed back against speculation about a 1.00% rate hike at the July 27 meeting. Their comments turned risk sentiment positive. Stocks and bonds rallied while the US dollar retreated.
Canada’s Finance Minister Chrystia Freeland “remains hopeful” that the Bank of Canada will engineer a “soft landing” for the economy. She said that inflation is “too high,” but the BoC has the tools to lower prices.
Canada’s June inflation report is due Wednesday and expected to be 8.3%. BoC Governor Tiff Macklem may have negated the FX impact of a strong number with his remarks last Thursday. He told a reporter that “Inflation is high sevens. It’s probably going to go a little over eight (8%). We have the next CPI next week. We know oil prices were very high in June, so I wouldn’t be surprised to see it move up.
The BoC hiked rates 1.00% on July 13 in due to current inflation levels and anticipation higher than expected CPI data.
Asian stock markets followed Wall Street’s lead and closed with strong gains. Australia’s ASX 200 gained 1.02%, while Japanese markets were closed due to a holiday. European bourses are trading with a bullish bias, with the German Dax, French CAC, and UK FTSE gaining over 1.20%. S&P500 futures are 0.89% higher. The US 10-year Treasury yield is 2.93%.
EURUSD rallied from 1.0080 to 1.0174 in a profit-taking rally ahead of Thursday’s ECB monetary policy. The ECB is raising interest rates with only a 0.25% or 0.50% hike in question.
GBPUSD rallied due to broad US dollar profit-taking, a rose from 1.1865 to 1.1990 in early NY. The gains are sketchy due to UK politics, Brexit, and a timid BoE monetary policy outlook.
USDJPY traded defensively in a 137.90-138.56 range, with improved risk sentiment and soft US Treasury yields weighing on prices.
AUDUSD rallied from the Asia open, climbing to 0.6842 from 0.6790, thanks to higher commodity prices and broad US dollar weakness.
NZDUSD rose from 0.6150 to 0.6190, with prices getting an added lift after ANZ Bank raised its forecast for the RBNZ’s peak OCR rate to 4.0% from 3.5%.