- European and many European markets closed for holidays.
- FX focus shifts to Fed after talk of debt ceiling deal.
- CAD best performing G-10 currency since Friday open.
USDCAD snapshot: open 1.3596-00, overnight range 1.3586-1.3617, close 1.3617, WTI $72.53, Gold $1946.01
The Canadian dollar came under pressure Friday after hotter-than-expected US PCE data fueled speculation the Fed would raise rates by 25 bps at its June 14 meeting.
That’s a U-turn from sentiment at the beginning of the month. Fed Chair Powell’s May 3 press conference concluded with most analysts believing the latest increase was the final hike for this cycle. A series of robust US economic reports forced market participants to re-evaluate their outlook for FOMC monetary policy.
The odds for rates to increase to 5.50% on June 14 are 66% and analysts have pushed calls for the first rate cut out to November from July, earlier this month.
This weeks is starting slowly but will get busy in a hurry starting tomorrow when Europe and America return from holidays.
Asian equity indexes gained on the US debt ceiling news. Japan’s Nikkei 225 index rose 1.03% while Australia’s ASX 200 index gained 0.88%. However, the Chinese indices dropped with Hong Kong’s Hang Seng index falling 0.44%.
European bourses are close to unchanged except for the German Dax which has risen by 0.74%. The US 10-year Treasury yield is 3.85%. S&P 500 futures have climbed 0.27%. The US 10-year Treasury yield is 3.85%.
Gold (XAUUSD) is in a downtrend channel that started May 10 with rates testing the March uptrend line at $1935.00 and is $147.00 below its May 3 peak. The prospect of higher US rates for longer fueled the decline.
Turkey’s Recep Erdogan rigged the election and surprise, surprise, he won. Prior to the vote, he kicked out then arrested three opposition MP’s, for espionage and treason and pressured the media. The Turkish lira weakened on the news.
EURUSD drifted in a 1.0714-1.0743 band with prices weighed down by EU/US interest rate differentials although national holidays ensured volumes were light.
GBPUSD traded lower in a 1.2337-1.2371 range. The downside continues to be vulnerable to long sterling positions being cut. That’s because some analysts suggest that expectations for sharply higher UK rates are being unwound due to recent economic data.
USDJPY remains bid, trading in a 149.19-140.91 range due to the prospect of higher US rates and a “dovish-for-longer" Bank of Japan bias.
AUDUSD traded in a 0.6522-0.6553 band due to the US rate outlook, and disappointment over China’s lackluster economic rebound.
There are no US economic reports today.
