Sterling bulls are hamburger again today.  GBPUSD was still reeling from the double whammy of dire hard Brexit warnings from Bank of England Governor Mark Carney and elevated concerns that Prime Minister May’s government was at risk. Those fears precipitated the GBPUSD drop from 1.3265 to 1.3078, yesterday. Sterling traded quietly in Asia and early European trading and then collapsed again, falling from 1.3115 to 1.3012 after a string of weaker-than-expected economic data. A weak inflation report was the killer.  June CPI rose 2.4% (forecast 2.6%) while core-CPI rose 1.9% (forecast 2.2%)  June PPI and Retail Prices were also soft. The weak economic data and Mr Carney’s remarks have downgraded expectations for an August 2 rate hike.

The US dollar extended yesterday’s gains overnight supported by yesterday’s Fed Chairman Powell’s testimony to Congress.  He said that the job market would stay strong, inflation will remain around 2% and that for now, the Fed will continue to gradually raise interest rates. US economic reports, including Industrial Production, Capacity Utilization and NAHB Housing Market Index were all as expected, and kept the growth narrative alive.  It wasn’t anything he hasn’t already said before, but still, traders bought US dollars.

EURUSD dropped from 1.1743 yesterday to 1.1608 this morning. Prices were steady in a  1.1648-1.1664 range in Asia.  Eurozone CPI was mixed to soft.  June CPI rose 0.1% as forecast, but core-CPI was flat.  A gain of 0.1% was expected.  Nevertheless, the results were close to expectations.

The commodity currency bloc was sold.  The outlook for higher US rates, weak oil prices and China/US trade concerns led to broad US dollar demand.

WTI oil prices continued to slide weighed down by fears of rising US inventories amidst increased production and slowing demand.

USDCAD rallied alongside the rest of the G-10 currency majors.  FX traders have already forgotten Bank of Canada’s relatively hawkish comments from last week and are focused on US developments.  Robust US data, expectations for higher US rates and the threat of Nafta collapsing are undermining the Canadian dollar.

There is only US data on today’s agenda.  It includes Building Permits and Housing Starts.  Mr Powell’s congressional testimony continues again today.

USDCAD Technical Outlook

The intraday USDCAD technicals are bullish while prices are above 1.3220.  A break above the 1.3250-70 area will extend gains to 1.3385. A move below 1.3220 will lead down to 1.3170.  The downtrend from June 28 ended yesterday with the break above 1.3180.  For today, USDCAD support is at 1.3220 and 1.3180.  Resistance is at 1.3270 and 1.3310.

Today’s Range 1.3180-1.3270.