– Canadian dollar flirting with major support
– Bank of Japan leaves monetary policy unchanged. USDJPY soars
– US dollar trading defensively compared to Thursday’s open
USDCAD Snapshot: open 1.2967-71, overnight range 1.2941-1.2987, close 1.2948, WTI open $118.76, Gold open $1,847.68
The Canadian dollar started sliding Thursday afternoon and continued to do so overnight, vastly underperforming compared to the Australian and New Zealand dollars.
The Canadian dollar suffered from US recession talk that raised fears of sharply lower American oil demand. West Texas Intermediate (WTI) extended losses from Tuesday’s $123.55/barrel peak, falling to $112.70/ before they bounced into the close. The rebound continued overnight. The Biden Administration is considering limiting fuel exports in an effort to limit gas price gains. Even so, the WTI uptrend from December 2021 is intact while prices are above 104.00.
The Canadian dollar benefit from the June 1 Bank of Canada rate hike and hawkish monetary policy outlook was fleeting. The BoC is expected to raise rates by 0.75% at the July 14 meeting, which matches the latest Fed hike. There is a risk for a jumbo !.0% increase if May inflation is higher than the forecast of 7.5%. BoC Governor Tiff Macklem said he is committed to bringing domestic inflation to the 2.0% target level so a jumbo rate hike would demonstrate his commitment.
Wall Street plunged Thursday due to slightly soft economic data sparking recession talk but DJIA and S&P 500 futures are suggesting a rebound this morning, although stocks have a lot of ground to cover before recouping yesterday’s losses.
EURUSD traded in a 1.0495-1.0559 range and sits in the middle of that ban in NY trading. The final Eurozone inflation reading for May was unchanged at 8.1% y/y.
GBPUSD is consolidating yesterday’s post-Bank of England rate hike. The BoE raised rates by 0.25%, but their warnings that inflation could hit 11% by October led to speculation of a 0.50% rate hike in August. The latest rally is just a correction unless prices can break above 1.2480.
USDJPY soared to 134.91 from 132.19 after the Bank of Japan left interest rates and its yield curve control policies unchanged. Many traders expected an increase in the YCC cap, but BoJ Governor Kuroda said doing so would weaken the effect of monetary easing.
AUDUSD traded defensively in a 0.6974-0.7050 range, underperforming NZDUSD, which consolidated yesterday’s gains in a 0.6314-0.6369 band. NZ Business PMI rose 52.9 compared to 51.2 in April.
US Capacity Utilization and Industrial Production data are on tap.