USD / CAD - Canadian dollar rally stalls
- Traders hoping for EU/US trade deal announcement
- Equities rise on trade deal hopes.
- US grinds out small gains.
USDCAD open 1.3611, overnight range 1.3591-1.3614, close 1.3599, WTI 66.17, Gold 3363.59
The Canadian dollar stalled at key resistance and its upside appears contained for now. Traders are reluctant to push it lower ahead of clarity on the ongoing Canada-US trade negotiations.
President Trump has announced a 35% tariff on Canadian imports, set to take effect August 1. In response, Prime Minister Mark Carney warned that he won’t accept a trade deal at any cost, and reports suggest Ottawa is readying countermeasures.
WTI oil prices rose in anticipation of renewed demand following the Japan/US trade deal and by a larger than expected drop in US crude inventories. The EIA reported US oil inventories fell by 3.1 million barrels last week.
May retail sales in Canada are projected to have declined 1.1%, reversing the 0.3% gain from April. However, the figures are taking a backseat to the intensifying tariff tensions and are unlikely to influence USDCAD trading in the near term.
Asian equity markets closed higher led by Japan’s Topix which rose 1.75%. The Hang Seng Index gained 0.51% while Australia’s ASX bucked the trend, slipping 0.32%.
European stocks rose as well. The UK’s FTSE 100 is up 0.96%, the DAX rose 0.48%, while France’s CAC 40 is down 0.12%. US equity futures pointed slightly higher, with S&P 500 futures up 0.13%. The US 10-year yield inched up to 4.40% as of 7:50 am EDT.
EURUSD hovered within a 1.1747-1.1780 band as markets awaited the European Central Bank's rate decision. No rate change is expected, and any forward guidance is likely to remain vague amid uncertainty over US-EU trade negotiations. German manufacturing PMI came in at 49.2, slightly below expectations, while Eurozone PMI matched forecasts at 49.8. A stronger-than-expected services PMI reading of 51.2 bolstered sentiment slightly, with S&P Global noting signs that the region's manufacturing downturn may be nearing an end. Traders, however, remained focused on trade developments.
GBPUSD traded on the defensive in a 1.3539-1.3589 range, slipping toward the low end in New York trading. Sentiment weakened after the UK Services PMI dropped to 51.2 from 52.8, highlighting a loss of economic momentum. A modest improvement in manufacturing PMI, which rose to 48.2 from 47.7, failed to offset the downbeat tone.
USDJPY consolidated within a 145.86-146.66 range following recent losses tied to the US-Japan trade announcement. The pair edged higher on the back of rising Treasury yields and was testing the upper end of the band in early New York trading. A break above 146.80 could open the door to a move toward 147.60. Japan’s manufacturing PMI slipped to 48.2 from June’s 50.1.
AUDUSD firmed within a 0.6597-0.6625 range, supported by upbeat risk sentiment after the US and Japan struck a trade deal, and on optimism that a US-EU deal could be imminent. The Aussie also found support after RBA Governor Michele Bullock advocated a cautious and gradual approach to rate cuts, which traders interpreted as a mildly hawkish signal.
Today’s US data includes weekly jobless claims and new home sales
