– Canada June inflation expected to rise 8.4% y/y
– UK CPI hits 40-year peak, rising 9.4%
– US dollar under pressure
USDCAD Snapshot open 1.2856-60, overnight range 1.2858-1.2881, close 1.2871, WTI oil $103.07, Gold $1713.17
The Canadian dollar started the New York session as the best performing major-G-10 currency since yesterday’s opening. The gains were sparked by global risk sentiment turning positive and steady to firm West Texas Intermediate (WTI) oil prices.
The positive shift in risk sentiment is because some analysts suggest that the fall in equities has reached a bottom. They argue that there are signs US inflation has peaked and that the July rate will be lower than 9.1% in June due to sharply lower oil prices. That is one of the reasons that a few Fed policymakers have pushed back against the idea of a 1.0% rate hike at the July 27 meeting.
Other analysts point out that the stock market outlook is not all “sunshine and unicorns.” They point out that companies are cutting earnings forecasts and planning layoffs in anticipation of a slowing economy.
Hardly a recipe for higher stock prices.
Canada’s June inflation data is due today. CPI is expected to have jumped to 8.4% y/y in June, well above the 7.7% level in May. Even a higher than expected result shouldn’t surprise anyone as the BoC pre-empted any shock when they hiked the overnight rate 1.0% last week.
EURUSD traded in a 1.0174-1.0272 range, with the peak seen in Europe and the low in NY. Prices were supported by news that gas would begin flowing through the Nord Stream 1 pipeline from Russia beginning tomorrow, by modestly lower Producer Price data in Germany, and yesterday’s rumour of a 0.50bp ECB rate hike on Thursday.
However, sentiment curdled in NY after Putin warned that gas shipments were not guaranteed in the face of EU sanctions on Russia.
GBPUSD peaked in Europe at 1.2036 and then dropped to 1.1966 in NY. UK inflation jumped to 9.4% y/y in June, which supported BoE Governor Andrew Bailey’s comment that rates could rise by 0.50%.
USDJPY bounced in a 137.91-138.37 range ahead of Thursday’s BoJ meeting. They are expected to leave monetary policy unchanged.
AUDUSD bounced around in a 0.6894-0.6929 band. RBA Governor Philip Lowe delivered a somewhat hawkish speech hinting that interest rates would rise 1.15% to the RBA neutral rate of around 2.5%.
There US economic calendar is empty.