June 25, 2024

• Canadian inflation rises 2.9% y/y (forecast 2.6%)
• BoC Governor predicting economic soft landing.
• US dollar mixed in uneventful trading.

FX at a Glance

Source: IFXA/RP

USDCAD open 1.3659, overnight range 1.3626-1.3663, close 1.3659

USDCAD dropped to 1.3626 from 1.3680 on the heels of a hotter-than-hoped for inflation reading but the loss was not sustained.  Headline CPI rose 2.9% y/y compared to the consensus forecast of a 2.6% increase and the 2.7% result in April. Core CPI rose 0.6% m/m which was far worse than the 0.2% expected. Even more problematic is that the acceleration in the headline number was due to higher prices for services.  That’s not a good result for those expecting a 25 bp rat cut on July 24

Source: Statistics Canada.

In a speech delivered in Winnipeg yesterday, Bank of Canada Governor Tiff Macklem shared his outlook, suggesting that the Canadian economy is headed for a soft landing. He pointed out that the gradual rise in unemployment to 6.2%, slightly above pre-pandemic levels, alongside a decrease in job vacancies without significant layoffs, signifies a smooth transition in the labor market. The increase in interest rates has successfully tempered demand and stabilized the job market, further supported by robust immigration.

WTI oil is steady in a 80.89-81.89 band. Concerns about dwindling crude inventories in the US this summer and rising Israel and Lebanon tensions are giving prices a bit of a bid.  .

USDCAD Technicals

The intraday technicals are bearish below 1.3690 and looking for a break below support at 1.3630 for a test of support in the 1.3580-1.3610 zone. A break above 1.3690 negates the week-long downtrend and shifts the focus to 12.3750

The longer term technicals are bullish.  The  USDCAD uptrend from the beginning of the year remains intact above 1.3610 with a cluster of moving average support also in the area.

For today  USDCAD support is at 1.362 0nd 1.3590. Resistance is at 1.3690 and 1.3740. Today’s range is 1.3610-1.3710

Chart: USDCAD 4 hour

Source: DailyFX

Make a New Plan Stan

It’s back to the drawing board for the Edmonton Oilers. Their plan to end a 31-year Stanley Cup drought and enter the history books for being the first team in 82 years to come back from a three-game deficit to win the Stanley Cup was devoured by the Florida Panthers last night.

Second-tier US data Will Not Move the Needle

The Chicago Fed National Activity Index rose 0.18 (-0.26 in April),  The Case-Shiller Home Price Index  Consumer Confidence for June are also ahead. Fed Governor and FOMC voting member Michelle Bowman and colleague Lisa Cook are making comments today.

EURUSD

EURUSD is at the bottom of its 1.0707-1.0745 overnight range with prices pressured by ongoing concerns ahead of the French election.  The poll-leading National Party, led by Marine Le Pan favours reducing Frances contribution to the EU to help fund proposed tax cuts.  

GBPUSD

GBPUSD is going tracking broad US dollar sentiment and trading negatively in a 1.2676 1.2702 range. Traders are cautious ahead of the July 4 UK election and Friday’s  US PCE Price index data.

USDJPY

USDJPY is erratic and back near the top of its 159.20-159.71 range. Prices continue to be supported by the hawkish FOMC outlook while recent comments from Japan Finance Minister Shunichi Suzuki warning of intervention limit gains.

AUDUSD and NZDUSD

AUDUSD traded in a 0.6645-0.6673 range. Traders appear more concerned about Wednesday’s Australian inflation report than they did about today’s better than expected Consumer Sentiment data (actual 1.7% vs-0.3% in May.

NZDUSD traded in a 0.6117-0.6131 range. Kiwi is underperforming against its Aussie cousin due to speculation that the RBNZ may cut rates in November, while the RBA could still be raising rates.

USDMXN

USDMXN traded down to 17.8764 yesterday after a mixed inflation report and after some analysts pushed rate cut expectations to August from June. Those losses were reversed overnight and USDMXN rallied from 17.8920 to 18.0775.

FX high, low, open (as of 6:00 am ET)

Source: Investing.com

China Snapshot

PBoC fix: 7.1225 vs exp. 7.2587 (prev. 7.1201).

Sanghai Shenzhen CSI 300 fell 0.54% to 3457.90.

Reuters claims that the Biden Administration has opened investigations into China Mobile, China Telecom and China Unicom over concerns the firms could exploit access to American data through their U.S. cloud and internet businesses by providing it to Beijing. “ET call Beijing”

Chart: USDCNY and USDCNH

Source: Investing.com