– Canada CPI and Retail Sales on tap.

– Putin speech aggravating geopolitical tensions.

– US dollar retreats compared to Friday open.

USDCAD snapshot open 1.3463-67, overnight range 1.3444-1.3493, close 1.3453, WTI $77.23, Gold


The Canadian dollar traded rather quietly since Friday. Traders are hoping to derive some direction from

the release of the January inflation report and December’s retail sales data.

Canada headline CPI is expected to fall from 6.3% in January to 6.1%. However, the more important

Bank of Canada Core CPI may tick up to 5.5% from 5.4% January. Traders are hoping for inflation to

continue to trend lower which would support the BoC’s decision to pause hiking rates. If so, USDCAD

downside should be limited.

That might not happen as gasoline and services prices have firmed.

Canada retail Sales are forecast to rise 0.2% in December compared to -0.1% in November.

The January employment report was surprisingly strong and if today’s inflation data surprises to the

upside, the Bank of Canada’s rate hike pause, may be short-lived.

USDCAD traded sideways in a 1.3441-1.3494 range with price action tracking broad US dollar and S&P

500 futures moves.

Oil prices were not a factor. West Texas Intermediate traded down from Friday’s close of $78.05 to a

low of $75.95 in early NY. The downside may be limited due to the impact of Russian energy sanctions ,

and the Kremlin’s decision to cut crude production.

EURUSD traded in a 1.0644-1.0704 range since Friday’s close and is just above the session low in NY.

Concerns around geopolitical tensions and the upcoming FOMC minutes offset better than expected

Euro area and German ZEW Survey data. EU ZEW Economic Sentiment rose to 53.3 in February from

48.7 in January. German Economic sentiment rose to 28.1 from 16.9.

GBPUSD traded in a 1.2010-1.2055 range yesterday and in the UK morning today, until February PMI

data. The upside surprise (actual 49.2 vs forecast 46.8, and January 47) saw GBPUSD bounce between

1.1988 and 1.2117, before easing to 1.2100 in early NY trading. The news increased the risk for further

BoE rate increases.

USDJPY traded in a 133.93-134.65 range. Demand for USDJPY due to higher US Treasury yields won out

over safe-haven selling pressures.

AUDUSD traded in a 0.6864-0.6919 range since Friday and opened in NY at 0.6878. Australian

Manufacturing PMI rose to 50.1 from 50 previously, while Services PMI climbed to 49.2 from 48.6. The

RBA minutes revealed that policymakers discussed a 50 bp hike. AUDUSD got an initial lift from the

news, but it quickly evaporated.

NZDUSD traded in a 0.6210-60 range. The RBNZ is widely expected to announce a 50 bp rate increase

tomorrow but the damage from Cyclone Gabrielle has led to calls for a less aggressive response

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