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USD / CAD - Canadian dollar pressured by dovish BoC

- Euro area Retail Sales and Investor Confidence survey weaker than expected.

- RBA expected to hike 25 bps tomorrow.

- US dollar ekes out gains compared to Friday’s close.

USDCAD snapshot open 1.3604, overnight range 1.3584-1.3627, close 1.3600, WTI $78.37, Gold $1850.23

The Canadian dollar traded with a slight negative bias inside a narrow band overnight. Markets were a tad underwhelmed by China announcing a 2023 GDP growth target of 5.0%, which is the lowest target in 25 years.

China announced its 2023 GDP target was 5.0% which was at the bottom end of the 5.0-5.5% target expected. Inflation is expected to be 3.0% and defence spending will rise to 7.2% from 7.1%. The news was viewed as negative for markets as the lower GDP target indicates a slower pace of global growth.

USDCAD traded in a 1.3584–1.3613 range until NY opened and prices climbed to 1.3627. The gains are due to caution ahead of Fed Chair Jerome Powell's congressional testimony on Tuesday and Wednesday.

Mr Powell is expected to reiterate his hawkish outlook for US interest rates, despite the fact that inflation has slowed in recent months, at 6.4% year on year, it remains well above the Fed's 2.0% target.

The hawkish Fed view received additional support from San Francisco Fed President Mary Daly and Richmond Fed President Thomas Barkin.

Ms. Daly repeated her warning that the Fed may need to raise interest rates higher and keep them there longer than the market expects.

Mr. Barkin seemed to concur. He suggested the benchmark rate could rise to 5.5–5.75%, which is well above most forecasts for a 5.1% terminal rate.

West Texas Intermediate oil prices are choppy. WTI churned in the $78.37-$79.61 range. News that Saudi Arabia increased the price of crude oil to Asia was offset by the lower than expected China GDP forecast.

The US 10-year Treasury yield dropped from a 4.072% peak on Friday to 3.903% in New York today, which undermined the greenback.

EURUSD traded in a 1.0617-1.0656 range. Hawkish comments from ECB Chief Economist Philip Lane offset weaker than expected investor confidence and retail sales data.

GBPUSD traded in a 1.1994–1.2047 range, rising on the back of broad US dollar weakness due to a drop in the US 10-year Treasury yield.

USDJPY bounced in a 135.38–136.18 range. Fear of a hawkish Fed is offsetting lower Treasury yields.

AUDUSD is trading defensively in the 0.6718-0.6768 range ahead of tomorrow’s RBA meeting, when a 25 bps rate hike is expected.

The US data calendar is empty.