- Trump heads to NATO Summit in Turkey
- Opec announces another production increase.
- US dollar opens with a bid tone.
USDCAD open: 1.4229, overnight range 1.4191-1.4232, close 1.4199, WTI 68.34, Gold 4,143.50
The Canadian dollar traded softly as the greenback was in demand across the board. Wide Canada-US interest rate spreads were another negative for the Loonie thanks to diverging policy paths at the BoC and the Fed. Analysts view the American central bank as tilting hawkish while its Canadian counterpart sits on the sidelines.
This morning brings the Bank of Canada's Business Outlook Survey and its Consumer Expectations Survey. Few Canadians will be shocked when the results reveal that inflation expectations have climbed. Even so, with inflation where it currently sits, the BoC has no reason to move rates in either direction.
WTI oil is stuck in a sideways 67.83-69.20 range, with gains capped after OPEC announced a further 188,000 b/d production increase for August. The bigger story is that supply is projected to outstrip demand by a wide margin in 2027.
Trump heads to Turkey today intent on reshaping NATO to his liking. He remains irritated that alliance members ignored his requests for help with the botched Iran operation, and there is a genuine possibility he reduces America's role in what is largely a European defence pact, leaving those countries to look after their own security. His musings about annexing Greenland have already taught European leaders that Russia is not the only menace they need to worry about.
Asian equity markets closed mixed. Hong Kong's Hang Seng climbed 1.14% and Japan's Topix added 0.92%, but Australia's ASX 200 slipped 0.15%.
As of 7:20 am, European bourses are flat to slightly lower, with the German Dax and French CAC 40 unchanged and the UK FTSE 100 off 0.31%. S&P 500 futures are 0.44% higher, the 10-year Treasury yields 4.458%, and the DXY sits at 101.07.
EURUSD traded in a 1.1410-1.1442 band, drifting lower through a subdued session. The single currency remains pressured by fading hopes for a September rate hike. A batch of Eurozone releases were ignored, including May PPI (5.9% y/y vs 5.7% expected), May Retail Sales (1.6% vs April's 0.9%) and July investor confidence (-3.1 vs -13.4 previously).
GBPUSD bounced between 1.3329 and 1.3357. Sterling traders are juggling evolving BoE policy expectations alongside guessing games about who Andy Burnham will name as Chancellor to replace Rachel Reeves. Burnham may be sworn in as Prime Minister on July 20. A softer than anticipated Construction PMI print (38.4 vs 40 forecast, 38.2 prior) barely registered.
USDJPY traded in a161.28-162.40 range, grinding higher after the US holiday weekend passed without any hint of BoJ intervention, which encouraged fresh buying. The bulls shrugged off Friday's tame NFP report, betting instead that the FOMC minutes will confirm the Fed's hawkish tilt.
AUDUSD was confined to 0.6922-0.6945, holding a modest bid inside a tight band despite broad US dollar demand. Benign inflation figures (the TD-MI gauge fell 0.4% m/m in June after May's 0.3% decline, with the annual rate easing to 3.9% from 4.4%) trimmed the odds of an RBA rate hike in the near term.
Today's calendar is thin, with ISM Services PMI the lone item of note (forecast 54, May 54.5).
