- Key US inflation data on tap.
- Global risk sentiment improves marginally.
- US dollar gives back some of this weeks gains.
USDCAD: open 1.3815, overnight range 1.3807-1.3827, close 1.3826, WTI $77.88, Gold, $2374.23.
The Canadian dollar traded sideways but modestly higher in a quiet session ahead of today’s important US data. The Fed-favorite inflation metric, Core Personal Consumption Expenditures-Price Index, is expected to have ticked down to 2.5% from 2.6% y/y. If so, many analysts expect that Fed Chair Jerome Powell will open the door wide for a September rate cut.
Canadian dollar gains may be limited due to the disparity between the robust US economy and Canada. Furthermore, the recent capital gains tax hike by the Federal government may be another drag on economic growth as it may lower investment, both foreign and domestic.
Asian equity markets were mixed. Japan’s Nikkei 225 index fell 0.53% while Australia’s ASX 200 index rallied 0.76%. European bourses are higher, led by a 0.86% rise in the French CAC-40. S&P 500 futures have gained 0.76% in anticipation of a tame PCE report.
The 2024 US Presidential contest is the FX wild card. The former President has a penchant for comments on every subject, particularly his three favorite themes: tariffs, Mexico, and China. His comments will continue to impact FX trading in the thin summer markets.
EURUSD traded in a 1.0842-1.0861 band with traders focused on US political developments and today’s PCE-Price Index data. The EURUSD uptrend from the beginning of the month is intact while prices are above 1.0820.
GBPUSD traded quietly in a 1.2851-1.2873 range. Traders are cautious ahead of possible UK tax increases and the risk that the Bank of England cuts rates on August 1.
USDJPY rallied in a 153.38-154.45 range overnight due to weaker-than-expected Tokyo CPI data (actual 1.5% y/y, June 1.8%). The price action is merely noise ahead of the July 31 BoJ meeting when a 0.10% rate hike is expected.
AUDUSD inched higher in a 0.6535-0.6567 band, but gains may be limited due to ongoing AUDJPY selling and concerns about China’s economic growth.
US Michigan Consumer Sentiment data is expected to remain unchanged at 66.
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