– Canada closed Monday

– China stimulus improves risk sentiment

– US dollar retreating

USDCAD Snapshot: open 1.2779-83, overnight range 1.278-1.2833, previous close 1.2823, WTI open $112.00, Gold open $1,846.73

The Canadian dollar is trading at the top of this week’s range, garnering support from broad-based US dollar weakness.

USDCAD topped out at 1.2980 in Asia on Monday morning and has made three attempts to crack below support at 1.2770 since Wednesday.

Hotter than expected domestic inflation, surging crude oil prices, and rebounding global equity markets from this week’s lows have fueled USDCAD losses.

The global market risk sentiment improved dramatically overnight when the Peoples Bank of China cut its 5-year Loan Prime Rate (LPR) by 0.15 bps to 4.45% from 4.60%. It left the 1 year LPR unchanged at 3.70%. Chinese equity traders were happy. The Shanghai Shenzhen CSI 300 rose 1.95% to 4,077.60

The news gave commodity prices a boost and drove equity markets higher. The major Asian equity indexes closed with strong gains and the positive sentiment continued in Europe. The UK FTSE 100 is leading the European bourses higher, rising 1.82% in early NY trading. S&P 500 and DJIA futures point to a solid open on Wall Street.

West Texas Intermediate (WTI) rallied from $105.50/b Thursday to $112.78/b today, supported by the Chinese monetary stimulus.

The White House said that China is not violating sanctions as it buys tankerfuls of Russian crude to replenish its Strategic Petroleum Reserves.

EURUSD rallied from 1.0556 to 1.0599. The improved tone for risk sentiment and hawkish comments from ECB officials suggesting a July rate hike underpins prices. However, the technicals remain negative while EURUSD is below 1.0710.

GBPUSD trades in a 1.2439-1.2495 band. UK Retail Sales data was better than expected, while GfK Consumer Confidence was worse. Bank of England Chief Economist Huw Pill warned of further UK rate hikes due to rising inflation.

USDJPY is in the middle of its overnight 127.54-128.29 range. Traders ignored the news that Japan’s April CPI rose 2.5% y/y in April compared to 1.2% in March.

AUDUSD and NZDUSD rallied following the PBoC rate hike as the Chinese stimulus lifted commodity prices. Australia’s federal election is this weekend, and bookmaker odds favor Labour’s Anthony Albanese becoming Prime Minister in a coalition government.

There are no US data reports today.


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