– Summer markets assessing Kamela Harris’ election chances.
– Expect directionless markets due to light data.
– US dollar gains overnight but opens mixed compared to Monday.
USDCAD: open 1.3765, overnight range 1.3752-1.3773, close 1.3758, WTI $78.58, Gold, $2406.89
The Canadian dollar is deep into the throes of the dog days of summer. Traders are hoping that tomorrow’s Bank of Canada monetary policy meeting and quarterly Monetary Policy Report (MPR) will spark some interest. If it does, the price action will be short-lived due to the impact that the US presidential elections have on global markets and the outlook for the Fed.
Traders and analysts will study the MPR for clues about the future path of monetary policy, but they will discount their findings heavily due to the Bank of Canada’s poor forecasting track record. The BoC can easily justify cutting interest rates by 25bps due to the latest Statistics Canada CPI data and the weak retail sales report, which is why such a move is fully priced in.
The BoC decision will only have a brief turn in the spotlight due to the US election. Vice President Kamala Harris wasn’t on the radar screen during the Democrat nominations and, until recently, would have been no one’s choice to run for President. That changed when Biden dropped out of the race and Democrats were scrambling to find a replacement. Kamala Harris has reportedly secured all the necessary votes to become the Democrat presidential candidate.
Traders are also looking ahead to the August 1 FOMC meeting. Fed Chair Powell adopted a dovish tone at the recent Senate hearings, and now analysts believe the upcoming meeting will set the stage for a September rate cut.
EURUSD shuffled in a 1.0856-1.0897 band and is trading at its session low in NY. ECB Vice President Luis De Guindos said, “When we say that we want to have more confidence, we mean more confidence that at the end of 2025 inflation will be at our definition of price stability, which is an inflation rate of 2% over the medium term. That’s the key question.”
GBPUSD is trading in the middle of its 1.2888-1.2935 range. Prices are supported by speculation that the BoE may delay cutting rates due to the new government’s plans to sharply increase public sector wages.
USDJPY dropped to 155.82 from 157.11 due to intervention fears and the overnight slide in US Treasury yields.
AUDUSD traded negatively in a 0.6621-0.6646 range due to the weak Chinese growth outlook and the prospect of earlier than expected RBA rate cuts.