Source: Wikipedia

June 9, 2021

BoC expected to leave rates and monetary policy unchanged

WTI oil gushes above $70.00/barrel

US CPI on Thursday is the key focus

USDCAD open 1.2086-90, Overnight range 1.2085-1.2115,  Previous  close 1.2117

FX at a Glance

FX Recap and outlook

Traders are nervous ahead of  Thursday’s US CPI number in light of the Chinese CPI and PPI data today.  PPI soared 9.0% y/y in May (forecast 8.5%), the steepest rise in twelve years.  CPI was a tame 1.3% y/y.

Global equity traders were not inspired.  The major Asian equity indexes closed modestly lower, while European bourses are a tad softer but still close to record highs.  Crude oil prices climbed on lower US inventories, and gold prices are basically flat.  10-year Treasury yields slid and are sitting at 1.512%.

Friday’s G-7 meeting lacks the entertainment value, and market risk it had when it was the “Donnie Trump Show,” which suggests it will be a non-event for markets.

EURUSD drifted higher in a 1.2172-1.2193 range.  Traders are cautious ahead of Thursday’s ECB meeting and US inflation data.  The ECB meeting is expected to be a ho-hum affair and have little impact on EURUSD.  The German Trade surplus widened in April, but traders ignored the news.   EURUSD remains bid above 1.2150.

GBPUSD climbed to 1.4188 from 1.4148.  The ongoing EU/UK dispute over Northern Ireland border checks is not a concern for traders.   Prices are supported by out-going Bank of England Chief economists Andy Haldane’s comments that “pretty punchy pressures on prices” may lead to the BoE tapering its stimulus programs.

USDJPY traded with a negative bias in a 109.34-109.51 band. Prices remained on the defensive as US Treasury yields declined.

AUDUSD and NZDUSD inched higher, tracking broad US dollar moves, with traders awaiting US CPI news. The drop in Westpac Consumer Confidence was due to coronavirus lockdown measures in Melbourne, and ignored by traders.

WTI oil prices climbed to $7060/barrel from $68.50 yesterday morning. The gains were fueled by the API report that US crude stockpiles fell 2.1 million barrels.  Prices continue to be underpinned by expectations that demand will increase as European and US economies recover from the pandemic and by a lack of a nuclear deal with Iran.

USDCAD climbed steadily yesterday, rising from 1.2070 to 1.2115, tracking US dollar moves vs the majors. That move has been largely reversed in overnight trading, in part because of the surge in crude prices.  The BoC is expected to leave interest rates and guidance unchanged, and there is no press conference.

Sharp-eyed observers looked at the official G-7 Finance Minister photo and wondered if Canada’s Finance Minister received special treatment.  Did Ms Freeland repeat Justin Trudeau’s comment that “budgets balance themselves?”

USDCAD technical outlook

USDCAD is stuck in a 1.2000-1.2150 range and will likely remain that way until after next week’s FOMC meeting.   USDCAD remains in a downtrend below 1.2120 looking for a break below 1.2040 to test 1.2000  For today, USDCAD support is at 1.2040 and 1.2010.  Resistance is at 1.2110 and 1.2140   Today’s range 1.2020-1.2120

Chart USDCAD 4 hour

Source: Saxo Bank

FX open, high, low, previous close

Source: Saxo Bank