- Risk sentiment improves on China covid and Services PMI data
- WTI oil prices dancing with $120.00/b again
- US dollar trading defensively in early NY markets
USDCAD Snapshot: open 1.2561-65, overnight range 1.2559-1.2600, close 1.2594, WTI open $119.81, Gold open $1,853.90
The Canadian dollar continues to consolidate last week’s gains. Surging oil prices, expectations of aggressive Bank of Canada rate hikes, and improved global risk sentiment are lifting the Canadian dollar.
West Texas Intermediate (WTI) is flirting with $120.00/barrel, and analysts forecast even higher prices. Goldman Sachs is predicting $125.00/b.
The proposed EU sanctions on Russian oil and sanctions from many western nations are expected to exacerbate tight crude supplies. Opec announced a larger than expected 648,000 barrel/day increase in production quota’s starting in July. However, many analysts say that the cartel can’t deliver the increase, and JPMorgan said the planned increase wouldn’t offset increased seasonal demand.
The Canadian dollar is only getting a bit of a benefit from rising oil prices. That’s because foreign investment into energy projects has been sharply reduced due to the Federal government’s anti-fossil fuels policies.
In addition, Canada’s main crude export, Western Canadian Select (WCS), is trading at a $20.80/barrel (as of June 3) discount to WTI. According to Bloomberg, a major reason for the discount is the Biden administration’s decision to tap into the Strategic Petroleum Reserves.
Fortunately, widening Canadian /US interest rate spreads in favour of Canada are giving the Canadian dollar a bit of a boost.
EURUSD firmed in a 1.0711-1.0751 range, then settled in the middle of the band in NY trading. The single currency is supported ahead of Thursday’s ECB meeting.
GBPUSD traded in a 1.2479-1.2576 range after UK markets reopened following the Queen’s Jubilee long weekend.
USDJPY traded in a 130.44-130.99 range overnight. Prices are underpinned by rising US Treasury yields and dovish comments from BoJ Governor Kuroda, saying Japan was not in a situation that warranted tighter monetary policy.
AUDUSD traded with a bullish bias in a 0.7189-0.7230 range due to broad US dollar weakness and the prospect of a higher than expected RBA rate hike tomorrow. The RBA is widely expected to hike rates 0.25%.
The US data calendar is empty.
