– Loonie probing resistance and hoping to break higher.
– FOMC widely expected to skip a rate hike today.
– US dollar opens mixed, but under pressure.
USDCAD snapshot: open 1.3287-91, overnight range 1.3287-1.3318, close 1.3315, WTI $70.09, Gold $1951.62
The Canadian dollar is inching higher and once again probing major resistance. The Loonie’s gains are due to widespread US dollar selling pressures stemming from analysts believing the Fed is at or one hike away from reaching its terminal rate.
That belief will be confirmed or denied after today’s FOMC meeting. The Fed is universally expected to leave rates unchanged at 5.25%, and the market no longer expects a rate cut in 2023.
The dot-plot projections in the Summary of Economic Projections will be closely scrutinized to ascertain if more rate hikes are ahead, with many believing the Committee will plot at least one more 25 bp increase.
The Canadian dollar is getting a bit of support from rebounding oil prices. West Texas Intermediate (WTI) rose from $69.09 to $70.46/b overnight following the American Petroleum Institute (API) reporting a 1.0 million-barrel increase in crude inventories in the week ending June 9.
However, the latest Oil Market Report (OMR) by the International Energy Agency took the steam out of the rally. The OMR predicted a sharp slowdown in global oil demand as 2024 fuel consumption expands at half of its usual pace due to the increased use of electric cars.
The report stated, “Growth in the world’s demand for oil is set to slow almost to a halt in the coming years. The shift to a clean energy economy is picking up pace, with a peak in global oil demand in sight before the end of this decade.”
The report did not identify the source of all the new electricity needed to power the electric vehicles. Canada, the US, Britain, and many parts of Europe have aging power grids that can barely handle current demand.
EURUSD consolidated its post-CPI gains in a 1.0775-1.0809 band. Euro area April industrial production rebounded and rose by 1.0% after falling 3.8% in March.
GBPUSD traded higher in a 1.2602 to 1.2648 range, with the gains underpinned by April GDP rising 0.2% m/m.
USDJPY chopped around in a 139.86-140.27 range, albeit with a bullish bias due to divergent Fed and BoJ monetary policy outlooks.
AUDUSD drifted in a 0.6764-0.6793 band, continuing to be supported by expectations for additional Chinese stimulus.
US PPI data is ahead.