USD/CAD - Inflation Just Shy of Expectations

The Canadian dollar in July is the best performing currency of the G7; this is on the back of the Bank of Canada's new mandate of staying ahead of the curve on inflation. The BOCs target inflation rate is 2%, but current readings are almost a percentage point below; so why is the market factoring in another hike in October? Bank Governor Stephen Poloz and Deputy Governor Carolyn Wilkins are concerned on where inflation models in a year or two are pointing, raising rates now or at the very least implying another hike gives the central bank ability to talk through weaker inflation data that they call transitory or temporary.

Consumer Price Index data released this morning showed y/y for June at 1.4% vs. estimates of 1.3%. Retail Sales m/m for May saw Retail Sales excluding Autos printed at -0.1% and Retail Sales printed 0.6. Expectations were 0.0% and 0.3% respectively. There are no economic releases from the U.S. today, therefore, investors expect the USD to trade off the broader market sentiment. The U.S. dollar has been underperforming as with the global central banker mandating interest rate hikes and or continuing with economic stimulus measures. The Dollar Index is -0.10% lower again today at 94.14 looking at the majors the Yen, Euro and Sterling have all made gains overnight.

Experts expect a range today of $1.2533 to $1.2607

The European Central Bank surprised the market at yesterday’s policy meeting and did not remove the Quantitative Easing bias statement as participants were expecting. ECB President Mario Draghi was also dodging questions about the expected timing and size of the Asset Purchase Target. Overall, the tone was more bearish than anticipated. The euro is currently trading at $1.4639.

Traders expect a range today of $1.4597 to $1.4682

Not much for the sterling to trade on today except for minor U.K. Public Sector Net Borrowing, which jumped above expectations of 4.3 billion and printed at 6.3 billion. The pound is currently trading at $1.6299.

Observers expect a range today of $1.6284 to $1.6390

The Australian dollar came under selling pressure today following dovish remarks by Reserve Bank of Australia Deputy Governor Guy Debelle. The Aussie-U.S. dollar pairing retraced furthered lower after the pair rejected key psychological level at $0.8000 yesterday. However, the positive tone around copper prices should help the limit its downside.

Oil (WTI): $46.18 U.S. per barrel

Gold: $1,250.31 U.S. per ounce

Silver: $16.41 U.S. per ounce

Copper: $2.7293 U.S. per tone

Dollar Index: 94.08

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