– Markets ignore Russian drama.
– EURUSD shrugs off weak German Ifo report.
– US dollar starts weak on the defensive.
USDCAD snapshot: : open 1.3165-69, overnight range 1.3141-1.3181, close 1.3182, WTI $69.48, Gold $1929.67
The Canadian dollar is resilient. On Friday, the currency shrugged off an end-of-week profit-taking rally just after breakfast, and the Canadian dollar inched higher into the close. Overnight, the Canadian dollar resumed its rally after the drama in Russia failed to spark a bout of risk aversion trading.
Russia experienced a mini and abbreviated revolution over the weekend. The Wagner Group, a private army led by a former caterer named Yevgeny Prigozhin, took umbrage with the Russian Defense Secretary and its “evil” military leadership and marched its forces from Ukraine toward Moscow.
Russian President Vladimir Putin fled the city like a scared rabbit, and it took the Belarusian President to negotiate a deal before things got out of hand.
The drama was merely a distraction for global markets, which remained focused on the risk of more aggressive Fed tightening.
The Canadian dollar may find some direction this week. The May Canadian inflation report is released and expected to show that headline inflation dropped, but Core-CPI remained unchanged. On Friday, April GDP is expected to rise by 0.2% month-on-month. Additionally, the quarterly Business Outlook Survey is released.
The data and the BOS will be key in determining if the Bank of Canada raises rates again at the July 12 meeting.
EURUSD is at the top of its overnight 1.0888-1.0917 range, despite weaker than expected German Ifo data. The Ifo statement said, “The Business Climate Index fell to 88.5 points, down from 91.5 points in May. Expectations were markedly pessimistic, and companies’ assessments of their current situations were worse.”
GBPUSD traded in a 1.2712-1.2747 band. Prices are underpinned by last week’s 50 bp rate hike from the Bank of England, but gains are hampered by concerns over UK economic growth.
USDJPY traded defensively, falling from 143.71 to 142.95 as it retraces a large portion of Friday’s rally. The prospect of a more aggressive Fed and a dovish Bank of Japan is underpinning prices. However, the threat of FX intervention is capping gains.
AUDUSD is at the bottom of its 0.6670-0.6693 range. Prices are in a downtrend channel between 0.6740 and 0.6750, with losses fueled by divergent RBA and Fed monetary policies and disappointment from China’s slow post-Covid recovery.