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USD / CAD - Canadian Dollar awaiting April inflation.

- Canada CPI expected to rise 2.7% y/y vs 2.9% in March.

- Fed’s Mester said she no longer sees three rate cuts in 2024.

- US dollar opens with losses from Friday.

USDCAD: open 1.3630, overnight range 1.3622-1.3644, close 1.3619, WTI $78.58, Gold, $2416.17.

The Canadian dollar traded very quietly overnight after falling to 1.3580 in thin trading on Monday. The focus is on today’s domestic inflation report. The consensus forecast is that CPI rose 0.5% m/m (0.5% in March) and 2.7% y/y (2.9% in March). Today’s data is a key input into the Bank of Canada’s June 5 monetary policy decision. A lower-than-expected outcome would almost guarantee a June rate cut, while a higher-than-forecast result would push the first cut out to July.

The April 1 carbon tax hike may be making the BoC’s job more difficult. It is expected to have increased inflation and, if so, could lead to a higher-than-expected CPI result today and boost the Canadian dollar as well. If inflation is as expected or lower, the odds for a Bank of Canada rate cut in June would increase.

WTI oil prices are trading at the lower end of their 78.00-79.30 range due to reduced concerns over potential Middle East supply disruptions and the news that rainfall has helped control wildfires threatening crude production in Fort McMurray.

EURUSD has traded within a narrow 1.0836-1.0897 range since Friday and is currently at 1.0870 in New York. With no significant US economic reports scheduled this week and the FOMC minutes from May 1 now considered outdated, market direction will likely come from ECB President Christine Lagarde's speech tomorrow and Thursday's Eurozone PPI data. Data from Germany and the Eurozone have been largely ignored.

GBPUSD has consolidated Friday’s gains, moving within a 1.2688-1.2726 range since Monday, supported by general US dollar weakness. Traders remain cautious ahead of tomorrow’s PPI and CPI data, which will influence the Bank of England's decision on whether to cut rates at the June 20 meeting.

USDJPY has drifted higher, increasing from Friday’s low of 155.25 to 156.65 overnight, primarily due to the rise in the US 10-year Treasury yield from 4.37% to 4.42% on Friday. Prices dipped in Europe and are currently trading at 156.15 in New York. Japanese Finance Minister Shunichi Suzuki reiterated his usual stance on managing FX stability.

AUDUSD traded defensively after peaking at 0.6710 yesterday, dropping to 0.6646 overnight, and then inching up to 0.6670 in early New York trading. The Reserve Bank of Australia's minutes from May 7 revealed that policymakers discussed raising rates before deciding to leave them unchanged. Consumer confidence fell, with the latest figures showing a decline to -3 from the previous -2.4.