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USD / CAD - Canadian Dollar Awaiting US Data

- Markets in holiday mode ahead of US CPI

- Global equity indexes trade narrowly

- US dollar opens mixed, CHF outperforms

USDCAD Snapshot open 1.2870-74, overnight range 1.2867-1.2894 close 1.2885, WTI oil $89.70, Gold $1794.19

The Canadian dollar continues to meander inside a well-defined trading band with domestic influences overshadowed by US forces.

Canadian dollar traders are biding their time until the release of the July US CPI report which is expected to show inflation cooling to 8.7% m/m from 9.1% in June.

A lower than expected report on the heels of last Friday’s blow-out nonfarm payrolls report will have pundits heralding Fed rate cuts in January 2023 and give the Canadian dollar a boost. A higher than expected reading will have the opposite effect.

WTI oil prices continue to consolidate losses from the end of July when prices peaked at $101.55/barrel. WTI traded narrowly from a low of $87.89, Monday to an overnight peak of $92.50/b due to a pipeline closure in Eastern Europe and bearish inventory data. The overnight session was not very interesting. Asia equity indexes closed with small losses, except those in China, while European bourses remain largely unchanged. DJIA and S&P equity futures are ticking higher in anticipation of a tame inflation report.

Today’s CPI data (forecast 8.7% y/y vs June 9.1% y/y) will set the stage for USD dollar direction for the rest of the month. In one corner, a group of analysts believe that if today’s data show inflation is slowing, the Fed will end the current rate hike cycle in 2022 and look to cut rates in early 2023. In the other corner, sit Fed officials say it is far too early to discuss rate cuts. Normally, you would bet on the Fed view, but its forecasting track record has been abysmal recently.

EURUSD traded in a 1.0203-1.0337 band overnight. German CPI rose 7.5% y/y in July, which was expected and not a factor. EURUSD gains are capped in the 1.0300 area.

GBPUSD drifted in a 1.2067-1.2105 range, with traders awaiting direction from today’s US data.

GBPUSD gains are limited due to the risk of a looming recession and Brexit issues.

USDJPY traded quietly in a 134.84-135.29 range, tracking broad US dollar sentiment and steady to soft US Treasury yields.

AUDUSD is consolidating Monday’s gains in a 0.6948-0.6978 range, looking to break above resistance in the 0.7000 area to target 0.7050.

The Canadian economic calendar is empty