US June CPI soars to 5.4% in June (forecast 4.9% y/y). Core surges 4.5%
China Trade data stronger than forecast
US dollar opens on mixed note, soars after CPI
USDCAD open 1.2478-1.2482, Overnight range, 1.2445-1.2481, Previous close 1.2453
FX at a Glance
FX Recap and outlook
Climate change is blamed for the 130.0 degree Fahrenheit temperature recorded in Death Valley, California on July 9. It won’t be long before Climate change is blamed for the super-hot US June inflation numbers.
The Bureau of Labor Statistics said the 0.9% m/m rise in June inflation is the largest one-month change since June 2008. The 5.4% y/y result is the highest increase since August 2008.
Fed Chair Jerome Powell and many of his colleagues have repeatedly said higher than target inflation would be transitory. Today’s data suggests that view may need justification when Mr Powell testifies before the Senate tomorrow.
The Wall Street Journal surveyed 67 economists between July 2 and July 7. They concluded that inflation may run hot, for longer than expected. If correct, it would put inflation at levels last seen in 1993.
Coronavirus outbreaks remain an issue. Australia expects to extend lockdowns in Sydney for another 4-6 weeks. France reinstated curfews in Martinique.
President Biden is turning the screws on China again. He is expected to issue a warning to American companies about the increased risks in operating in Hong Kong, as well as imposing more sanctions
Opec and UAE have not agreed on production levels, leaving the existing agreement in place until the August meeting, and underpinning crude prices in the process. The monthly International Energy Agency (IEA) report warns that the world faces a shortage of oil and higher prices without an agreement.
China’s trade data was stronger than expected, which keeps the “global economic recovery” story alive. The Trade balance rose to $51.5 billion from $45.53 bn, with Exports rising 32.2% and imports climbing 36.7%.
EURUSD rallied in Asia, peaking at 1.1874, then dropped to open at 1.1843 in NY before plunging to 1.1807 after the inflation data. EU Commission President Ursula von der Leyden said 50% of EU citizens are vaccinated, which makes them half and half-nots. The final reading of German inflation was as expected (2.1% y/y) and not a factor. Traders are awaiting today’s US inflation report. The EURUSD technicals are negative and looking for a break below 1.1780.
GBPUSD peaked at 1.3904 in Asia then slid steadily and touched 1.3802, post-CPI. Traders are looking ahead to tomorrow’s UK CPI, PPI, and Retail Price data. The break below 1.3830 puts 1.3740 in play..
USDJPY is grinding out gains after touching 109.55 last week, but needs to break above 110.60 to shift the focus to 111.00. US 10-year yields climbed to 1.388% from 1.366% after the inflation data, which lifted USDJPY 110.52.
AUDUSD shrugged off weaker than expected Business Confidence and Business Conditions data because the weakness was due to the resurgence of COVID-19, and rallied from 0.7478 to 0.7502 following the Chinese Trade data. The move reversed by the NY open and AUDUSD dropped to 0.7432.
NZDUSD tracked AUDUSD moves, with traders looking to tomorrows RBNZ policy statement, which is expected to be modestly hawkish.
USDCAD recouped all its overnight losses just before NY opened., the rallied to 1.2528 after CPI. Gains may be slowed by steady to firm oil prices, and forecast that WTI will rise further due to the Opec/UAE spat. The Bank of Canada policy statement and Monetary Policy Report are due Wednesday.
There are no Canadian economic reports today.
USDCAD technical outlook
The intraday USDCAD technicals are bullish above 1.2370, a level guarded by previous lows in the 1.2430 zone. A break above 1.2510 suggests a re-test of 1.2550, while below 1.2430 targets 1.2370. For today, USDCAD support is at 1.2430 and 1.2410. Resistance is at 1.2510 and 1.2550 Today’s range 1.2440-1.2530
Chart USDCAD hourly
Source: Saxo Bank
FX open, high, low, previous close