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USD / CAD - Canadian dollar clawing back losses.

- Oil prices rising on record demand.

- Month-end portfolio rebalancing flows weighing on US dollar.

- US dollar trading with a slight negative bias.

USDCAD: open: 1.3225-29, overnight range 1.3216-1.3261, close 1.3253, WTI 81.14, Gold $1956.98

The Canadian dollar didn't see much support despite May GDP accelerating to 0.3% m/m, compared to 0.1% in April. The result was impressive as it seemed unaffected by the public sector workers' strike. Unfortunately, the June forecast suggests growth will slow to 0.2% m/m.

Traders largely ignored the Canadian data and focused their attention on developments south of the border. The Core Personal Consumption Expenditures Price index fell to 4.1% y/y in June, and the Employment Cost Index (ECI) dipped to 1% from 1.1%. Both reports show that inflation is moving in the right direction, raising hopes that the Fed will achieve an economic "soft-landing."

Minneapolis Fed President Neel Kashkari is also hoping for a soft landing. He said, "Right now, the base-case scenario seems to be that we'll have a slowing economy, but that we would avoid a recession." However, he also warned that the Fed would raise rates further if needed.

The Canadian dollar is only seeing modest support from rising oil prices. West Texas Intermediate (WTI) climbed to $81.43/barrel from $80.15/b overnight. Analysts at Goldman Sachs believe that global oil demand is near a record due to increased Chinese demand and the impact of Russian and Saudi Arabian production cuts.

Chinese PMI data for July was mixed. Manufacturing PMI remained in contraction territory, but at 49.3, the result was better than expected and better than in June. Traders were concerned that the non-manufacturing PMI result was lower than expected.

EURUSD traded in a 1.1006-1.1039 range. Prices got a bit of support after Eurozone Q2 GDP rose 0.6% q/q, topping the forecast for a 0.4% gain, while July inflation fell 0.1%, compared to the consensus forecast for a 0.3% gain.

GBPUSD traded in a 1.2836-1.2867 range with prices tracking EURUSD moves. There were no UK economic reports today, and traders are cautious ahead of Thursday's BoE meeting. The UK government appears to be rethinking its fossil fuels strategy and announced hundreds of North Sea oil contracts.

USDJPY had a wild overnight session, rising from 140.70 to 142.49 in early NY trading after the BoJ intervened in the bond market. The move served to depress JGB bond yields and lifted USDJPY.

AUDUSD traded firmer in a 0.6649-0.6709 range ahead of the RBA decision. The market is divided as to whether the central bank hikes rates by 25 bps or leaves them unchanged.

The Chicago PMI index is due (forecast 43, vs June 41.5)