– Canadian dollar rising on negative USD sentiment.
– Higher oil prices support Canadian dollar gains.
– US dollar opens little changed from close but is down on the week.
USDCAD: open 1.3116-20, overnight range 1.3094-1.3137 close 1.3110, WTI $76.85 Gold $1956.11
The Canadian dollar continued to move higher overnight, thanks to widespread US dollar selling pressure. The negative US dollar sentiment stems from a series of weaker-than-expected US inflation reports, including the weaker-than-expected producer prices data that sparked a major shift into risk-seeking trades. The Canadian dollar went along for the ride.
The Canadian dollar is also getting a bit of support from the Bank of Canada’s decision to raise interest rates by 25 bps this week and from the monetary policy statement suggesting further rate increases were likely.
West Texas Intermediate oil prices rallied from $72.77/barrel on Monday to $77.26/b in Europe, which also served to boost the Canadian dollar. The oil gains are due to new supply disruptions in Nigeria and Libya as well as the previously announced Russian and Saudi Arabian production cuts.
Traders ignored comments from Fed policymaker Christopher Waller, who said, “The robust strength of the labor market and the solid overall performance of the U.S. economy give us room to tighten policy further.” He added, “I see no reason why the first of those two hikes should not occur at our meeting later this month.”
Asian equity markets closed on a mixed note, and European bourses are trading mixed as well. S&P 500 futures are up 0.18% and point to a positive open on Wall Street. That was made more likely after JP Morgan announced it made $19 billion in Q2.
EURUSD ranged in a 1.1212-1.1245 band after rising 2.5% since Monday. A lack of new data and the upcoming weekend suggests EURUSD could retreat slightly due to profit-taking.
GBPUSD is steady in a 1.3095-1.3141 range. Prices continue to be underpinned by expectations of higher UK interest rates, even as the Fed reaches its terminal rate.
USDJPY traded choppily in a 137.24-138.83 range as it continues to suffer from carry-trade unwinding and concerns that the Bank of Japan may implement a hawkish tweak to policy when it meets on July 27.
AUDUSD consolidated yesterday’s gains in a 0.6864-0.6894 range, with price action mirroring US dollar sentiment.
The Michigan Consumer Sentiment report is due today