– Canadian trade surplus expected to increase
– UK Prime Minister bows to the inevitable and resigns
– US dollar stages mild retreat following FOMC minutes
USDCAD Snapshot open 1.3002-06, overnight range 1.2994-1.3054, close 1.3035, WTI oil $99.35, Gold $1743.46
The Canadian dollar is bobbing and weaving like a cork in a stormy sea. USDCAD has whip-sawed between 1.2800-1.3080 since June 13, and there is no reprieve in sight.
Traders fear sharply rising US interest rates will drive the US and global economies into a recession, the severity of which is open to debate.
The risk of higher US rates was reinforced yesterday with the release of the FOMC minutes from the June 15 meeting. The minutes said that another rate hike of between 50 and 75 basis points is likely at the end of July, which isn’t anything new. Fed Chair Jerome Powell said the same at his post-FOMC meeting press conference.
The minutes also showed the Committee members were hawkish. They noted that policymakers “recognized the possibility that an even more restrictive stance could be appropriate if elevated inflation pressures were to persist.”
Wall Street closed with small gains, and the major Asian equity indexes followed suit. Japan’s Nikkei 225 index closed 1.47% higher, while Australia’s ASX 200 finished with a 0.81% gain. European bourses were wobbly at the open, then rallied aggressively, led by a 1.65% increase in the German Dax. DJIA and S&P 500 futures are grinding out small gains.
The US 10-year Treasury yield recouped yesterday’s losses and rallied to 2.95% in early NY trading.
GBPUSD is front and center, having rallied from 1.1911 to 1.2022. The gains were mostly due to profit-taking and position adjusting ahead of Friday’s US employment report. However, UK Prime Minister Boris Johnson may have played a role. He resigned. It took the mass resignations of fifty of his ministers to force his hand. They had lost confidence in his leadership after a series of scandals rocked his office.
EURUSD rallied from 1.0176 to 1.0220 in Europe, then retreated to 1.0190 in early NY. The gains were due to broad US dollar weakness, but the EURUSD bias is negative due to geopolitics and ECB policies.
USDJPY chopped about in a 135.56-136.21 range. Higher US Treasury yields underpinned prices, but safe-haven demand for yen due to recession worries limited the topside.
AUDUSD rallied to 0.6848 from 0.6766 after Australia’s trade surplus widened by $2,717m to $15,965m in May. NZDUSD got a bit of a boost as well.
Today’s US data includes Trade Balance and weekly jobless claims. Canadian Trade and the Ivey PMI are on tap.