- BoC expected to hike rates 0.75%, issue hawkish statement
- US CPI forecast to rise 8.8% y/y in June
- US dollar modestly lower, AUD outperforms
USDCAD Snapshot open 1.3011-15, overnight range 1.3003-1.3033, close 1.3003, WTI oil $96.48, Gold $1728.34
The Canadian dollar continues bounce erratically inside the well-defined USDCAD 1.2880-1.3080 trading range, without any inclination to broaden its horizons. That may change after today’s Bank of Canada monetary policy statement at 10:00 am EDT and press conference at 11:00 a, EDT.
The BoC is widely expected to raise the overnight rate by 0.75%. If so, the news will not do anything to take USDCAD out of its 1.2880-1.3080 range.
However, Canada CPI is well above the Banks targets, and it is starting to impact longer-term inflation expectations as evidenced by the latest Business Outlook Survey.
Hiking rates by 1.0% to help prevent rising inflation concerns becoming entrenched would be an aggressive move. However, such a move is unlikely, as a 0.75% bump is the biggest move since the 1990’s.
The BoC statement should set the stage for another 0.75 rate hike in September, although recession concerns may temper the language to a less aggressive sounding outlook.
USDCAD is not getting much help from oil prices. Global recession fears knocked WTI from $97.31/barrel to $93.71/b overnight, although International Energy Administration (IEA) forecasts suggesting supply tightness will worsen should limit the downside.
Today’s US inflation report will drive USDCAD direction at least until the BoC meeting.
Asian equity indexes closed with a mildly positive bias. Japan’s Nikkei 225 rose 0.54% and Australia’s ASX 200 index gained 0.29%.
European bourses are in negative territory led by a 0.90% drop in the German Dax index., while US equity futures are modestly higher.
EURUSD traded in a 1.007-1.0067 range, with better than expected Eurozone data and profit-taking giving the single currency a boost.
GBPUSD traded in a 1.1872-1.1935 range supported by a surprisingly strong May GDP report (actual 0.5% vs forecast 0.0%) May GDP rose a surprising 0.5% compared to a drop of 0.3% in April, while Manufacturing and Industrial Production reports were higher than forecast.
AUDUSD drifted higher in a 0.6744-0.6784 band, underpinned by profit-taking in a thin, pre-US CPI market.
NZDUSD rallied from 0.6107 to 0.6150 in NY with the expected 0.50% rate hike from the RBNZ helping to underpin prices.
