– EURUSD gives back post-ECB rate hike gains
– Canada Retail Sales on tap
– US dollar outperforms overnight
USDCAD Snapshot open 1.2863-67, overnight range 1.2865-1.2896, close 1.2865, WTI oil $95.85, Gold $1724.36
The Canadian dollar is trading close to its peak for the week despite soft oil prices and renewed US dollar demand against the majors.
On Thursday, USDCAD bounced from 1.2860 to 1.2935, met resistance from the July 15 downtrend line, and dropped to 1.2865, where it closed.
Canadian dollar traders are ignoring the drop in West Texas Intermediate (WTI) oil prices, which have fallen from $104.20/barrel on Tuesday to $94.27/b in Asia overnight. The oil sell-off is due to speculation that the combination of Covid in China, renewed Libya output, and signs US crude inventories are rising. However, traders are ignoring the longer term implications of the Russia/Ukraine war.
The Western sanctions against Russia will remain in place for a long time while Chinese Covid measures are easing, both of which underpin WTI prices.
Canada Retail Sales are expected to have risen 1.6% in June compared to 0.9% in May. The data should not impact USDCAD trading since the BoC already hiked rates by 1.00%.
Wall Street closed with gains, and that positive sentiment helped to lift the major Asia equity indexes. Japan’s Nikkei 225 index closed 0.40% higher, although Australia’s ASX 200 closed flat. European bourses have held on to small opening gains, with the German Dax index up 0.29%. Wall Street futures are flat.
Financial markets ignored news that President Biden caught Covid, which would only become a big deal if he needed to be replaced by Vice President Kamal Harris.
The euro had a volatile twenty-four hours. EURUSD surged from 1.0160 to 1.0275 Thursday after the ECB surprised markets and hiked rates by 0.50%. Traders were caught off guard because President Christine Lagarde and her colleagues had all but confirmed rates would only rise 0.25%
The ECB also introduced their Transmission Protection Instrument (TPI), which is supposed to reduce fragmentation in European bond yields.
EURUSD was also on the defensive after news Italian Prime Minister Mario Draghi resigned, opening the door to an election in September or October.
GBPUSD traded in a 1.1918-1.2002 range overnight and is sitting at 1.1944 in NY as weak UK data and political uncertainty weigh on the currency. July Manufacturing PMI dipped to 52.2 from 52.8, while Services PMI fell to 53.3 from 54.3. GBPUSD intraday technicals are bearish below 1.2050.
USDJPY is trading near the bottom of its overnight 137.04-137.94 range due to softer Treasury yields. The US 10-year yield dipped to 2.818% from 2.904% in Asia.
AUDUSD and NZDUSD are trading lower due to broad US dollar strength and lower commodity prices.