– Canadian dollar rises 2.30% in June.
– Canada April GDP expected to rise 0.2% (March 0.0%)
– US dollar opens on a mixed note ahead of US PCE data.
USDCAD snapshot: open 1.3252-56, overnight range 1.3243-1.3267, close 1.3252, WTI $70.21, Gold $1905.03.
The Canadian dollar opened in NY right where it closed on Thursday after a very uninspiring overnight session. Traders are content to await the release of the Fed’s favorite inflation gauge, Core-PCE, which is expected to rise 0.3% m/m compared to 0.4% in April.
The Canadian dollar is on the cusp of closing the June session as the best performing major G1-0 currency after rising 2.30% from where it opened on June 1 to the NY open today. It wasn’t even a close race as the Australian dollar which finished second, rose only 1.64%. The Japanese yen was the worst performing currency as it lost 3.57% due to the Bank of Japan sticking to its ultra-easy monetary policy while the Fed turned more hawkish.
Canada’s economy is expected to have expanded 0.2% in April, which may be artificially low due to the Public Sector strikes. Stronger than expected growth alongside unchanged inflation expectations will suggest the BoC hikes rates again on July 12.
Today’s focus has shifted to the US Personal Consumption Expenditure report which is reportedly the Fed’s preferred measure of inflation. Unfortunately is likely to muddy the waters further rather than provide any clarity to the US rate hike debate. Core-PCE, is expected to rise 0.4% m/m compared to 0.4% in April.
EURUSD traded in a 1.0836-1.0875 range, consolidating yesterday’s losses, which were fueled by a more hawkish outlook for US interest rates. The headline Eurozone HICP dropped to 5.5% from 6.1% in May, but core inflation ticked higher, rising to 5.4% y/y from 5.3%. The results suggest that the ECB will stick to hiking rates, as planned. The intraday EURUSD technicals are bearish below 1.0880, with a break below 1.0830 targeting 1.0750.
GBPUSD traded choppily in a 1.2601-1.2650 range, with the bottom occurring in Asia and the peak in Europe. The UK avoided a recession when Q1 GDP rose 0.1%.
USDJPY rallied to 145.06 in Asia, with traders daring the Bank of Japan to intervene like they did last September when prices rose above 145.00. The gains are supported by higher US 10-year Treasury yields, which rose from 3.68% on Monday to 3.874% in NY today.
AUDUSD traded in a 0.6605-0.6636 range. Prices are supported by the possibility of an RBA rate hike following yesterday’s strong Retail Sales data, but gains are limited by broad US dollar demand.
US traders are looking ahead to an extended long weekend. July 4 is Tuesday, and those who can will take Monday off as well.