- Canada June inflation data on tap.
- US Retail Sales data is overshadowed by politics.
- US dollar recoups some losses in uneventful overnight trading.
USDCAD: 1.3678, overnight range 1.3674-1.3695, close 1.3682, WTI $80.22, Gold, $2443.05
The Canadian dollar is trading with a negative bias due to broad US dollar demand against the G-10 majors, driven by fears of a Trump-tariff-inspired global economic slowdown. The Canadian dollar is also suffering from concerns that the Bank of Canada may cut interest rates on July 24, which could intensify following today’s domestic inflation report.
Canada’s headline CPI is expected to have risen just 0.1% m/m in June. However, it is the Bank of Canada’s measure of Core CPI that is key. A weaker-than-expected result would likely trigger the rate cut, especially after yesterday’s Bank of Canada Business Outlook Survey (BOS).
The BOS ticked all the boxes for justifying a rate cut. Economic growth was subdued, employment pressures have dissipated, and inflation is ticking lower. The BOS indicator eased to -2.9 from -2.4 in Q2. The Canadian dollar inched lower on that news, but external factors also weighed on the Loonie.
West Texas Oil prices dropped to 79.53 from 80.87 due to global growth concerns and increased OPEC and friends production beginning in October.
US Retail Sales are expected to be a tad softer, falling to 0% from 0.1%, but that result will be offset by Retail Sales ex-autos rising 0.1% from -0.1% in May.
Yesterday, Fed Chair Jerome Powell’s comments raised the odds for at least two Fed rate cuts in 2024 after he admitted he had improved confidence that inflation was returning sustainably to 2.0%.
EURUSD traded narrowly in a 1.0883-1.0994 range and was unable to get any traction following mixed German ZEW data. Economic sentiment declined to 41.8 from 47.5, which was offset slightly by an increase in the economic situation to -68.9 from -73.8. Trading may be choppy into the 10:00 am EDT option expiry window as $3.7 billion of strikes between 1.09 and 1.0910 mature, with another $1.8 billion at 1.0920.
GBPUSD traded in a 1.2951-1.2977 range ahead of UK inflation and retail sales data tomorrow. Weaker-than-expected data could tip the scales in favor of an August rate cut, which would limit gains.
USDJPY inched higher in a 157.99-158.80 range due in part to speculation that if Trump wins the election, USDJPY could rally on fears of new tariffs. The Bank of Japan reportedly spent about $39.5 billion intervening in FX markets last week.
AUDUSD drifted lower in a 0.6732-0.6765 range on the back of broad, but mild, US dollar strength due to fears of new tariffs if Trump wins.
