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USD / CAD - Canadian dollar awaiting October GDP

- Inflation eases in Eurozone.

- Canada GDP is expected to be flat.

- US dollar opens with gains.

USDCAD: open 1.3604-08, overnight range 1.3541-1.3620, close 1.3590, WTI $79.44, Gold, $2038.35

The Canadian dollar rally ended abruptly yesterday and managed to flip technicals from bullish to bearish. The US dollar saw renewed demand overnight after a series of Euro area inflation reports suggested the ECB will be reducing interest rates as early as next summer.

The Canadian dollar clawed back some losses as this update is being written when the UK Financial Times claimed that Saudi Arabia received provisional backing for oil production cuts from cartel members. West Texas Intermediate (WTI) rose from $77.46 in Asia to $79.59/barrel in NY, then quickly dropped to $78.62. The discussions are ongoing.

Analysts do not expect much from Canada’s October GDP data. It is expected to be flat, but a weaker than expected result may limit Canadian dollar gains.

There is plenty of US data today which may reinforce sentiment that the next Fed rate move will be to cut rates. Fed Chair Jerome Powell’s reportedly favorite measure of inflation, Core PCE price index, is expected to have dropped to 3.5% from 3.7% in September. Initial weekly jobless claims are expected to rise by 11,000 to 220,000. The Chicago PMI is forecast at 45.4 (previous 44) and October Pending Home Sales are expected to be down 2.0% after rising 1.1% y/y in September.

EURUSD traded in a 1.0909-1.0984 range with sellers emerging after Eurozone inflation fell to 2.4% in November, down from 2.9% in October. The news gave rise to speculation that the ECB rates would be cut by July.

GBPUSD sank in a 1.2631-1.2711 range mainly due to broad US dollar strength. The currency has some support due to the perceived hawkish bias of BoE Governor Bailey.

USDJPY rallied in a 147.79-146.84 band supported by rising US Treasury yields. Japan saw higher than forecast industrial production, but weaker than expected retail trade.

AUDUSD traded with a bearish bias in a 0.6595-0.6651 range with price action tracking US dollar moves.