July 16, 2024
- Canada Core CPI rises 2.7% compared to 2.9% in May.
- US Retail Sales surprise to the upside but markets ignore the results
- US dollar drifts higher in subdued overnight session.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3678, overnight range 1.3674-1.3701, previous close 1.3682
USDCAD is running with the herd, and this herd is modestly bullish on US dollars. The rationale is sketchy, but it includes the return of a hostile global trade environment under President Trump. That sentiment is weighing on commodity prices and commodity bloc currencies.
USDCAD got an added boost after Canadian headline and core inflation rose less than they did in May. Headline CPI rose 0.1% m/m (May 0.6%) while Core CPI rose 0.1% m/m compared to 0.3% in May. A BoC rate cut may not be the slam-dunk that the Statistics Canada inflation data suggests because the BoC’s measures were a tad less conclusive. The BoC Core inflation measure ticked up to 1.9% y/y from 1.8% y/y but fell 0.1% m/m from 0.6% m/m in June. That gives the BoC all kinds of wiggle room to justify any action or inaction. However, yesterdays Business Outlook Survey showed weakening inflation pressures, cooling employment, and soft economic growth. That could tip the scale in favour of a July cut.
WTI oil is trading lower, falling from Friday’s peak of 83.67 to 79.23 in early NY trading today. The combination of weak Chinese GDP data and the negative impact on global growth under Trump, combined with OPEC’s planned production increases in October, is driving prices lower.
USDCAD Technicals
The intraday technicals are bullish above 1.3640 and looking for a break above the 1.3705-10 area to extend gains to the 1.3750-60 area which has capped gains for over two weeks.
The longer term technicals are bullish while prices are above 1.3590 and looking for a break above 1.3750 to extend gains to 1.3890.
For today USDCAD support is at 1.3640 and 1.3610. Resistance is at 1.3710 and 1.3740. Today’s range is 1.3650-1.3750
Chart: USDCAD 4 hour
Source: DailyFX
“Have a Nice Day”
Fed Chair Jerome Powell didn’t actually suggest that markets should have a nice day, but his comments boosted the odds for two rate cuts (November and December) in 2024, and depending upon the next PCE Price Index data, it could be three. Mr. Powell said, “What we’ve said is that we didn’t think it would be appropriate to begin to loosen policy until we had greater confidence that inflation was returning sustainably to 2%. We’ve been waiting on that. And I would say that we didn’t gain any additional confidence in the first quarter, but the three readings in the second quarter, including the one from last week, do add somewhat to confidence.”
US Retail Sales, ex autos rose 0.4% (forecast 0.1%, May 0.1%) and the results served to reduce the odds of a September rate which gave the greenback a boost.
“Shot through the ear, its all part of the game”
Bon Jovi sang that getting shot through heart was all part of the game that we call love, and the Trump campaign has updated those lyrics.
Donald Trump leveraged getting shot in the ear as an opportunity to convert an obscure, rookie senator from Ohio to “Super Fan” and then promoted him to the role of Vice President-to-be. J.D. Vance, a 39-year-old political veteran with almost 18 months of experience, has called Trump a “moral disaster” and “America’s Hitler” but changed his tune with the promise of Air Force 2, motorcades, and Secret Service. Mr. Vance sounded confused when he parroted John F. Kennedy’s 1961 line, saying, “And so, my fellow Americans, ask not what I can do for your country, but what can my country do for me.”
EURUSD
EURUSD dropped to 1.0875 from a pre-CPI level of 1.0903, after trading in a 1.0883-1.0994 range overnight. The greenback popped after the US Retail Sales report gave the Fed room to justify leaving rates unchanged. Earlier, the German ZEW data was mixed and largely ignored. Traders are looking ahead to the 10: am EDT (7:00 am PDT) option expiry window because $3.7 billion of strikes between 1.09 and 1.0910 mature, with another $1.8 billion at 1.0920.
GBPUSD
GBPUSD mirrored EURUSD moves, pre-and post-CPI with prices trading in a 1.2938-1.2977 range. The focus has shifted to Wednesday’s UK data releases which include Retail Sales and Inflation. Which could bbe the catalyst for the BoE to cut rates at the August meeting.
USDJPY
USDJPY inched higher in a 157.99-158.86 range due in part to speculation that if Trump wins the election, USDJPY could rally on fears of new tariffs. The Bank of Japan reportedly spent about $39.5 billion intervening in FX markets last week.
AUDUSD and NZDUSD
AUDUSD drifted lower in a 0.6718-0.6765 range on the back of broad, but mild US dollar strength because of fears of new tariffs if Trump wins. NZDUSD is in the middle of its 0.6043-0.6880 range with traders sidelined ahead of tomorrow’s NZ inflation data.
USDMXN
USDMXN is giving back some of Monday’s gains and is trading in a 17.7253-17.8125 range. The currency pair continues to be supported by concerns about Trump’s re-election and by last week’s dovish comments by Banxico Deputy Governor Omar Mejia, who wanted to see a rate cut.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: 7.1328 vs exp. 7.2671 (prev. 7.1313).
Shanghai Shenzhen CSI 300 rose 0.63% to 3498.26.
Chart: USDCNY and USDCNH
Source: Investing.com
