Canadian Dollar Consolidation Continues
The Canadian dollar continues to combine the gains achieved since the Bank of Canada raised interest rates. Expectations of further rate increases in the coming months as well as a steep rise in oil prices have fueled the Canadian dollar’s rapid rise. Lately, added gains have been hard to come by. Traders are looking for either a new reason to sell USDCAD or a reason to take profits.
They are hoping that today’s Federal Open Market Committee policy statement will give the answers. Unfortunately, that is unlikely to be the case. The FOMC is widely expected to leave interest rates unchanged. Many believe that any changes to policy will not be announced before the summer break but rather in September.
Overnight, FX markets were active but inside narrow ranges. EURUSD was offered which is understandable after this week’s sharp gains and the proximity of the FOMC meeting.
Sterling traded sideways in Asia but rallied after UK Q2 GDP rose 1.7%, y/y, even though the result was expected. GBPUSD extended gains in early New York trading, rising from 1.3008 to 1.3059.
In Asia, Australia CPI data was weaker than expected (Actual 1.9% vs. forecast 2.2%, y/y). The core measure was unchanged. Reserve Bank of Australia Governor Lowe echoed comments made earlier by the Deputy Governor. He said the “RBA won’t move in lockstep” with other central banks.” AUDUSD dropped from 0.7940 to 0.7879 but recovered in Europe and was trading at 0.7915 after New York opened.
The New Zealand dollar rallied when the Merchandise trade report surprised to the upside. Those gains disappeared due to ongoing inflation concerns.
Bank of Japan Deputy Governor Nakaso said that the BoJ would continue with its current easy money policy. No one cared. USDJPY was stuck in a 111.78-112.07 range.
WTI rallied from $47.88 to $48.57 after the American Petroleum Institute said US crude inventories dropped by more than 10 million barrels This week’s news of more production cuts by Saudi Arabia, the possibility that Opec/non-Opec production cut extension and a production cap for Nigeria underpinned prices.
FX Ranges for major currency pairs