The Canadian dollar extended it’s rally in early trading this morning. April GDP, Raw Materials Price Index and Industrial Product Price data beat the forecasts. The better than expected data reinforced rate hike expectations in July, especially after Governor Poloz stress that the monetary policy decisions were data dependent not headline dependent. USDCAD dropped from 1.3260 to 1.3202.
Prices ticked higher as traders await the quarterly Business Outlook Survey.The BOS risks undermining the Canadian dollar gains if the survey suggests that rising trade tensions have caused businesses to curtail investment and hiring plans.
The US Personal Income and Expenditure data were in line with forecasts.
Overnight, the European Council averted a crisis. Italy refused to sign the Summit conclusions until their concerns about migrant issues were addressed. The Council caved, and the EU agreed to set up migrant processing centers.
EURUSD spiked on the news, rising from 1.1565 in Asia to 1.1665 before the European session began. Prices have bounced in a 1.1610-1.1665 range since then, and they opened in New York near the peak. Eurozone HICP inflation (1.9%, y/y) was expected. EURUSD was also supported by profit-taking ahead of the weekend.
GBPUSD rallied on the back of the EU news, climbing from 1.3073 to 1.3128 in early European trading. Prices accelerated to 1.3181 after UK Q1 GDP was higher than forecast, gaining 0.2%, q/q (0.1% was expected) Prices opened a tad lower in New York as Brexit concerns still weigh on the currency pair
The US dollar retreat didn’t provide much help for the Japanese yen USDJPY drifted higher in a 110.38-110.78 range. Soft US Treasury yields are hampering topside moves.
The commodity currency bloc got a reprieve. The broad US dollar selling lifted Aussie, Kiwi and the Loon, in a pre-weekend profit taking move. AUDUSD gains may be capped by expectations for a dovish RBA meeting next week. Trade tensions, Nafta, the possibility of auto tariffs will combine to limit USDCAD losses.
The first half of the year is just about done. The commodity currency bloc is the worst performing major G-10 currencies against the US dollar, led by a 5.8% drop in the Australian dollar followed by a 5.5% drop in the Loonie. The Japanese yen was the only currency to gain, rising 1.3%. Elevated global trade risks and rising US interest rates suggest the trend will continue during the summer.
USDCAD Technical Outlook
The first half of the year is just about done. The commodity currency bloc is the worst performing major G-10 currencies against the US dollar, led by a 5.8% drop in the Australian dollar followed by a 5.5% drop in the Loonie. The Japanese yen was the only currency to gain, rising 1.3%. Elevated global trade risks and rising US interest rates suggest the trend will continue during the summer