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USD / CAD - Canadian dollar erases gain

- Risk sentiment sours after weak China PMI data.

- Eurozone unemployment rate inches lower

- US dollar gains across the board-AUD worst performing currency.

USDCAD: open: 1.3258-62, overnight range 1.3187-1.3273, close 1.3189, WTI 81.36, Gold $1957.06

The Canadian dollar gave back all of yesterday’s gains overnight after disappointing Caixin China PMI data soured risk sentiment.

The Caixin Manufacturing PMI fell to 49.2 from 50.5 in June . It is further evidence that the Chinese economy is struggling to recover from Xi Jinping’s ham-fisted, zero-tolerance Covid-19 policy, despite a rash of targeted stimulus measures announced recently.

The Canadian dollar rallied on Monday due to portfolio rebalancing demand, but the Loonie was unable to hang on to the gains. USDCAD climbed into the close, then accelerated higher overnight and is trading at the top of the range in early New York markets.

Asian stock markets started the new month on a positive footing. Japan’s Nikkei 225 index closed with a 0.92% gain while Australia’s ASX 200 index gained .54%. The major Chinese indexes closed with small losses due to the weak data.

European bourses are in negative territory, led by a 0.81% decline in the German Dax index. S&P 500 futures are down 0.29% as of 8: 45 am EDT.

EURUSD traded in a 1.0966-1.1003 range. The Eurozone unemployment rate dipped to 6.4% y/y in July, while Manufacturing PMI was as expected at 42.7. Traders are looking ahead to today's US data and Wall Street action.

GBPUSD traded defensively in a 1.2810-1.2841 range. Prices were weighed down by broad US dollar demand while mixed data releases were ignored. Housing prices fell 0.2% in June compared to expectations for a 0.1% increase, while Manufacturing PMI was 45.3, a tad higher than the forecast of 45, but still in contraction territory. The focus remains on Thursday's Bank of England meeting.

USDJPY traded firmer, rising from 142.21 to 142.84, supported by renewed US dollar demand and a slightly firm US 10-year Treasury yield. In addition, BoJ officials continued to stress that last week's YCC tweak was merely meant to increase the sustainability of monetary easing and not a shift in policy. Also, a Bloomberg poll suggested the Bank of Japan will leave monetary policy unchanged until April 2024.

AUDUSD traded poorly, falling from 0.6723 to 0.6626 after the RBA surprised half of the market and left interest rates unchanged at 4.1% and because of the weaker than expected Chinese PMI report. The RBA statement noted that inflation is declining but still high at 6.0%, and the economy was experiencing below-trend growth. However, the statement also said that further tightening may be required.

Today’s US data includes the JOLTS Job openings report and ISM Manufacturing PMI.