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USD / CAD - Canadian Dollar getting squeezed

- US Retail Sales expected to rise 0.2% m/m.

- German and Eurozone ZEW data ignored.

- US dollar opens consolidating recent moves.

USDCAD: 1.3748, overnight range 1.3710-1.3757, close 1.3723, WTI $79.56, Gold, $2311.16

The Canadian dollar is trading defensively despite higher crude oil prices due to an abundance of caution ahead of today’s US economic data.

The source of the Canadian dollar woes can be traced to the Canada/US 10-year bond spread. It has widened to -94.2 from 76.2 just one month ago due to expectations that the Bank of Canada will follow-up June’s rate cut with another in July or September. Meanwhile the FOMC dot-plot is projection just one rate cut in 2024.

WTI oil prices traded in a 79.17-79.93 range supported by hopes for increased summer demand although traders are concerned about supply gains. BoA analysts note that global crude oil inventories and refined product storage was higher.

US Retail Sales are expected to have risen by 0.2% m/m in May compared to a flat reading in April. A higher than expected result will support the US dollar as it suggests the Fed does not need to cut interest rates any time soon. Capacity Utilization and Industrial Production data are also due.

Asian equity indexes closed with strong gains. Japan’s Nikkei 225 and Australia’s ASX 200 finished with a 1.0% gain. The French CAC 40 index is leading European bourses higher, rising 0.53%, while S&P 500 futures are flat.

EURUSD traded defensively in a 1.0715-1.0741 range. The French/German bond spread has not widened further, which is giving the single currency a bit of support, although that can change depending upon electioneering ahead of the first round vote on June 30. Today’s German ZEW data reflected stagnant sentiment. Eurozone Inflation was as expected. Traders ignored the results.

GBPUSD is near the bottom of its 1.2672-1.2716 overnight range, weighed down by profit-taking in EURGBP and broad US dollar demand ahead of Retail Sales. Trading was subdued ahead of Thursday’s Bank of England monetary policy meeting. The GBPUSD technicals are bullish above 1.2670.

USDJPY climbed from 157.51 in Asia to 158.24 just before NY opened. BoJ Governor Kazuo Ueda told parliament, “There's a chance we could raise interest rates at our next policy meeting, depending on economic, price, and financial data and information available at the time.”

AUDUSD rallied from 0.6585 to 0.6633 after the RBA left interest rates unchanged at 4.35% and warned about ongoing inflation risks.