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USD / CAD - Canadian dollar stuck in a loop

- G-7 meeting starts on Friday.

- FX volumes low in Europe due to national holidays.

- US dollar extends gains overnight, CAD outperforms.

USDCAD snapshot: open 1.3469-73, overnight range 1.3454-1.3480, close 1.3455, WTI $72.51, Gold $1977.71

The Canadian dollar is stuck in a loop and going nowhere. Prices have been trapped in a USDCAD range of 1.3300-1.3360 since the middle of April and that is unlikely to change before the Bank of Canada monetary policy meeting on June 7.

And speaking about the BoC, Governor Tiff Macklem has a press conference at 11: 00 am EDT today to discuss the quarterly Financial system Review (FSR). The FSR is a recap of the BoC Governing council’s judgement on the main vulnerabilities and risks to the Canadian financial system. It sounds important, and is, but the results rarely impact FX markets.

Canadian dollar traders are also ignoring oil price developments. West Texas Intermediate (WTI) is consolidating this weeks gains after rising from $$69.40/b on Monday to $73.20/b yesterday. WTI prices are being whip-sawed by fears of slowing Chinese demand, and higher US crude inventories, offset by the Alberta wildfires forcing the cancelation of shipments of about 300,000 barrels/day.

Risk sentiment improved modestly after news that President Biden would cut his Asian trip short to return to Washington. Pundits suggest the trip curtailment is evidence that a debt ceiling agreement is near.

EURUSD drifted in a 1.0808-1.0847 range. The single currency garnered support from the optimism about a debt ceiling deal. However, FX activity was muted due to a rash of national holidays across the Eurozone including France and Germany.

GBPUSD traded in a 1.2430-1.2491 range with prices rising and falling with every shift in US dollar sentiment. Bank of England Governor Andrew Baily is testifying before parliament and discussing the Bank’s management of quantitative tightening. Prime Minister Rishi Sunak and Japanese Prime Minister Fumio Kishida announced a new partnership called “The Hiroshima Accord.”

USDJPY rallied from 137.30 to 137.93 due to steady US Treasury yields and broad US dollar demand. Japanese trade data was not a factor.

AUDUSD retreated from 0.6666 to 0.6631 after weak Australian employment data. Australia employment lost 4,300 jobs in April (forecast 25,000) while the unemployment rate climbed to 3.7% (previous 3.5%).