– Fed Chair Jerome Powell testifies to Congress today.
– Canada’s April retail sales expected to rebound modestly.
– US dollar inches higher on slight risk aversion sentiment.
USDCAD snapshot: open 1.3221-25, overnight range 1.3211-1.3244, close 1.3234, WTI $71.17, Gold $1933.41
The Canadian dollar is trading aimlessly in its well-defined range but has a moderately positive bias. Traders are awaiting the April retail sales report and the bank of Canada’s Summary of Deliberations (SED) report which is released at 11:30 am.
Of the two, the SED is probably the most important because it may shed some light into the BoC’s decision to surprise markets and raise interest rates on June 7. If the SED reveals that policymakers are more hawkish than expected, USDCAD may test support in the 1.3150 area.
Retail sales data are always somewhat sale, but this April result is overshadowed by the BoC rate hike and should be of little interest to traders.
Fed Chair Jerome Powell’s testimony to the House Financial Services Committee is also unlikely to create any drama. That’s because the FOMC decision and his press conference was only a week ago and nothing has occurred since that would change his views.
EURUSD traded quietly in a 1.0907-1.0933 range. The single currency is consolidating its post-ECB gains after President Lagarde essentially pre-announced a July rate hike, but traders are cautious ahead of Fed Chair Powell’s testimony today.
GBPUSD dropped to 1.2693 from 1.2802 due to the ‘inflation blues.’ Headline CPI rose 8.7% in May, unchanged from April but higher than the expected 8.4%. Even worse, Core-CPI rose to 7.1% (forecasted 6.8%, April 6.8%). The Bank of England is expected to hike rates tomorrow, and today’s inflation data warns it could be a 50 bp increase. GBPUSD remains in an uptrend while prices are above 1.2620.
USDJPY rallied from 141.29 to 142.16 before easing down to 141.75 in NY. USDJPY continues to be underpinned by the Bank of Japan’s dovish outlook, with one board member suggesting there is little chance that the yield curve control (YCC) policy would be tweaked in July.
AUDUSD traded sideways with a negative bias in a 0.6759-0.6798 range. Sentiment continued to be negative due to disappointment over China’s failure to announce a new stimulus plan and the relatively dovish RBA minutes.
There is not much US data, but in addition to Powell, a flock of Fed officials, including Mester, Cook, Jefferson, and Goolsbee, will offer their views on monetary policy.