- Bank of Canada expected to leave rates unchanged
- Oil prices consolidate yesterday’s losses despite ceasefire violations
- US dollar opnes mixed to softer ahead of US inflation numbers.
USDCAD open: 1.3927, overnight range 1.3924-1.3957, close 1.3948, WTI 87.99, Gold 4,169.16
The Canadian dollar keeps inching higher ahead of today's US inflation numbers. A hotter than expected print should trigger a more aggressive run at the topside. Widening CAD/US 2-year rate spreads are also capping the gains.
Canada posted back-to-back trade surpluses, with April coming in at $2.7 billion, but the news did little for FX.
The Bank of Canada is expected to hold rates steady today and serve up a dovish outlook. They can hardly argue for hikes after the latest GDP numbers and the "technical recession" result. But they can afford to wait because, unlike other regions, Canada does not have an inflation problem, at least by the BoC's metrics. Consumers may think otherwise.
WTI oil shrugged off the latest Iran/US ceasefire violations and sits mid-range within 87.50-89.95. Not a single ship transited the Strait of Hormuz in the past 24 hours.
Global markets were rather uninspired ahead of todays US inflation print and Friday's SpaceX listing. That will change if CPI rises for than the 2.9% y/y expected.
In Asia, stocks finished without a clear direction, caught between the ceasefire breaches and a hotter Chinese PPI reading. Japan's Topix shed 1.25%, Hong Kong's Hang Seng slipped 0.64%, and Australia's ASX 200 bucked the trend with a 0.57% gain.
By 6:45, Europe had turned lower across the board, with Germany's DAX off 0.82%, France's CAC 40 down 0.41%, and the UK's FTSE 100 easing 0.45%. S&P 500 futures are 0.66% lower, the 10-year Treasury yielded 4.543%, and the DXY is 99.90.
EURUSD traded in a tight 1.1533 to 1.1560 band, marking time before the US inflation release. Core CPI is forecast to rise to 2.9% from 2.8% y/y even as the monthly pace cools to 0.3% from 0.4%. With the ECB deciding policy tomorrow and fresh ceasefire violations in the Middle East, few traders saw reason to commit.
GBPUSD firmed in a 1.3368-1.3400 range in a listless session. Softer crude gave the pound a little lift, though the renewed US Iran confrontation kept any rally on a short leash.
USDJPY inched higher in a 160.24-160.52 band with buyers pushing the pair further into levels that risk official intervention, brushing aside Japanese warnings about watching for "excessive FX moves." For now, the prospect of a Fed hike spooks them more than the chance of a BoJ move on June 16.
AUDUSD is trading negatively in a 0.6998-0.7033 as prices are weighed down by Chinese inflation figures and the widening policy gap between the RBA and the Fed. The Australian central bank may be finished raising rates, just as the Fed may be readying to begin.
