– Falling commodity prices crush Loonie

– FX markets roiled by US rate hike debate

– US dollar opens mixed, consolidating this weeks gains

USDCAD Snapshot open 1.3092-96, overnight range 1.3090-1.3134, close 1.3117, WTI oil $95.90, Gold $1702.31

The Canadian dollar has picked itself off the canvas after being nearly KO’d yesterday. The Loonie lost over 1.9% between its Asia low and mid-morning in NY yesterday. It was nasty, and due to widespread US dollar demand as traders reacted to speculation, the Fed would raise interest rates by a full percentage point on July 27.

USDCAD soared from 1.2971 to 1.3224 as the triggering of stop-loss trades exacerbated gains in thin summer markets. Plunging oil prices helped fuel the rally as West Texas Intermediate (WTI) dropped to $90.55/b from $96.92/b.

Prices started to recover following remarks by Fed policymakers James Bullard and Christopher Waller. Mr Bullard didn’t sound like he was a fan of hiking rates 1.0%.

He said he preferred to stick with a 75 bp increase as that action would be an “unprecedented” move.

Governor Waller blew hot and cold. He said, “I support another 75-basis point increase, bringing the target range for the federal funds rate to 2-1/4 to 2-1/2 percent before August.” Then he qualified his remarks by saying, “my base case for July depends on incoming data. We have important data releases on retail sales and housing coming in before the July meeting. If that data comes in materially stronger than expected, it will make me lean towards a larger hike at the July meeting.”

Those remarks sparked a sharp profit-taking sell-off in the US dollar which then consolidated the losses in overnight markets.

EURUSD recovered after falling to 0.9950 yesterday and traded in a 1.0008-1.0065 range overnight.

Traders are biding their time until next week’s ECB monetary policy meeting. The EURUSD technicals are negative.

GBPUSD rallied from a low of 1.1762 on Thursday to 1.1852 overnight. Further gains may be difficult due to UK recession risks and political uncertainty.

AUDUSD and NZDUSD were rangebound, but gains were capped by weaker than expected Chinese Q2 GDP results.

Today’s data includes US June Retail Sales (forecast 0.8% m/m vs May -0.3%) as well as Business Inventories, Capacity Utilization, and Michigan Consumer Sentiment reports. It may have an outsized impact on trading after Governor Waller’s remark about strong data and larger rate hikes.

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