- US CPI data will likely be inconclusive
- Weekly jobless claims data could be a flash-point.
- US dollar steady but on the defensive after quiet overnight session.
USDCAD: open 1.3631, overnight range 1.3614-1.3640, close 1.3621, WTI $82.24, Gold, $2384.09.
The Canadian dollar traded uneventfully overnight and opened in Toronto near the top of its USDCAD range. The Canadian dollar gains are solely because of renewed hopes for an earlier-than-expected Fed rate cut, thanks to Fed Chair Jerome Powell’s testimony to Congress on Tuesday and Wednesday. Mr. Powell reinforced those hopes when he responded to a question on rates saying, “It doesn’t seem likely that the next policy move would be a rate increase. As we make more progress on inflation, we begin to loosen policy at the right moment.” Many traders are hoping that the first rate cut would occur in September. Another Senator asked him if cutting rates in September could be seen as a political move. He was not impressed and said, "Our undertaking is to make decisions when and as they need to be made, based on the data, the incoming data, the evolving outlook and the balance of risks, and not in consideration of other factors, and that would include political factors. We have a long history of doing that, including during election years. Anything we do will be very well grounded. It's just not appropriate for us to get into the business of thinking about election cycles at all, one way or the other." That is Fed speak for "NO."
Today’s inflation data has a lot riding on it. That’s because traders are desperately seeking a catalyst that will blow summer lethargy out of the water. Unfortunately, that won’t happen today. Headline CPI is expected to drop to 3.1% from 3.3% in May, but any positive sentiment from that news will be offset if Core CPI is unchanged at 3.4%. Fed Chair injected employment back into the rate cut debate. Yesterday (and Tuesday), he told the Senate that the job market has cooled considerably. Today’s weekly jobless claims are expected at 236,000, and a sharply lower result would suggest that perhaps the job market has not cooled as much as Mr. Powell thinks.
EURUSD drifted aimlessly in a 1.0827-1.0853 range. German CPI and HICP were exactly as expected and not a factor, ahead of today’s US CPI numbers.
GBPUSD rallied from 1.2848 to 1.2882 after UK GDP rose more than expected in May (actual 0.4%, forecast 0.2%, April 0%). Manufacturing Production and Industrial Production were weaker on the month but unchanged year over year.
USDJPY remains in nose-bleed territory after trading in a 161.47-161.76 range. A benign BoJ and steady Fed rates continue to fuel gains.
AUDUSD rose from 0.6744 to 0.6764 on general US dollar weakness. Australian CPI fell 0.1% to 4.3% y/y but was not a factor.
The Canadian data calendar is empty
