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USD - CAD - Canadian dollar retreats

- Canadian dollar consolidates Friday’s losses.

- China Q2 GDP misses forecasts.

- US dollar opens the new week on a mixed note.

USDCAD: open 1.3219-23, overnight range 1.3207-1.3231, close 1.3218, WTI $74.07, Gold $1958.55

The Canadian dollar rally abruptly came to an end on Friday due to stronger-than-expected University of Michigan Consumer Sentiment data, which soured risk sentiment. Traders rushed to book profits after the week's rally.

During Asian trading on Friday, USDCAD tested support in the 1.3090-1.3100 range and then saw prices drift higher into the US market opening. The Consumer Sentiment index rose to 72.6, surpassing the forecasted increase to 65.5. As a result, USDCAD surged past the downtrend line resistance at 1.3140 and continued its upward climb, reaching a peak of 1.3231 overnight.

Economists and analysts are predicting that the Fed will raise rates by another 25 bps in September, while the Bank of Canada's decision is more uncertain and resembles a coin-flip scenario. BoC Governor Tiff Macklem has a habit of sending mixed signals, saying one thing to the markets but then doing the opposite. The Bank's forward guidance has been notably inadequate, and their forecasting performance has been poor.

Canadians were taken by surprise when the BoC increased rates by a staggering 475 bps since March 2022. Only eighteen months earlier, Mr. Macklem had advised consumers and businesses to take advantage of low interest rates as they were expected to persist for a significant period. Then, in January 2023, he indicated that rates had reached a peak, leading everyone to believe that the BoC's highest rate would be 4.5%. However, the Governor proceeded to hike rates by 25 bps in both June and July.

By any measure, the BoC's performance has been subpar. Nevertheless, this did not prevent the Bank from rewarding themselves with $20.5 million in pay raises and bonuses.

The Canadian dollar also faced challenges as West Texas Intermediate oil prices dropped from $77.26 on Friday to $73.88 today, primarily due to increased production from a Libyan facility.

EURUSD remains steady within the range of 1.1216 and 1.1248, and traders eagerly await remarks from ECB President Lagarde.

GBPUSD maintains its strength after trading within a range of 1.3067-1.3108. Traders disregarded the UK Rightmove House Price Index data, which revealed a 0.2% month-on-month decline in July compared to June's 0.0%.

USDJPY fluctuated between 138.17 and 138.83, causing traders to exercise caution amid concerns that the BoJ may make modest adjustments to tighten monetary policy by month-end.

AUDUSD traded within a range of 0.6806-0.6847, with prices being weighed down by disappointing Chinese Q2 GDP data (actual 6.3% versus the forecasted 7.3% and previous 4.5%).

There are no significant data points scheduled for release in the US or Canada today.