– Holidays in Europe reduce trading volumes
– Weekly jobless claims and retail sales highlights of US data dump.
– US dollar trading quietly and mixed.
USDCAD: open 1.3704, overnight range 1.3702-1.3726, close 1.3717, WTI $77.50, Gold, $2457.09
The Canadian dollar is grinding out gains, mainly due to widespread US dollar selling against the majors. The Canadian dollar is getting some support from hopes that the Fed will cut rates more aggressively which would narrow the CAD/US interest rate differential. As it stands now, a 25 bp Fed rate cut in September is fully priced into the current CAD exchange rate, so the Loonie needs a fresh catalyst to fuel additional gains.
That catalyst could come in the form of sharply rising oil prices which would happen if Iran made a full-scale attack on Israel. If so, destruction of Iranian oil infrastructure or new Western sanction on Iranian exports could negate existing oversupply concerns, driving WTI higher.
Today’s U.S. weekly jobless claims data (forecast 235,000 vs. 233,000 last week) and Retail Sales (forecast 0.3% vs. 0% in June) could inject some life into FX markets if the results stray too far from predictions. The U.S. data dump also includes import/export prices, the Philadelphia Fed Manufacturing Survey, Empire State Manufacturing Survey, Business Inventories, Capacity Utilization, and Industrial Production. Yet, traders are really just counting down to next week’s Jackson Hole Symposium, hoping Fed Chair Powell drops any policy bombshells. Canada wholesale sales are expected to have fallen 0.6% in June compared to -0.8% in May.
EURUSD is meandering within a narrow 1.1003-1.1016 band, with the euro buoyed by expectations that U.S. interest rates may decline more swiftly than those in the Eurozone. Norges Bank contributed to this sentiment today by holding rates steady at 4.5%, emphasizing the need for a restrictive policy to control inflation.
GBPUSD fluctuated between 1.2820 and 1.2861, with the low point reached during Asian trading and the high following strong economic data. Q2 GDP climbed by 0.6% quarter-on-quarter, while Manufacturing and Industrial Production figures exceeded expectations. This data suggests that the Bank of England may still be on course for a rate cut in November, according to ING analysts.
USDJPY remained within a 147.05-147.62 range, with prices supported by a slowdown in the unwinding of carry trades. Domestic data offered little support for the yen, with Industrial Production dropping 4.2% month-on-month in June.
AUDUSD advanced from 0.6571 to 0.6631, buoyed by an outstanding employment report. Australia saw an increase of 58,200 jobs in July, including 60,000 full-time positions. These figures are likely to keep Australian interest rates elevated.
