NY Open: Inflation surge boosts CAD
A surprisingly strong Canadian inflation print has placed USDCAD on its back foot in the early New York session. Could this clear a path towards a September rate hike from the Bank of Canada?
FX markets will be busy this week... just not today. Traders are looking ahead to the Bank of Japan meeting tomorrow, the Federal Open Market Committee meeting Wednesday, and the Bank of England show on Thursday. If that’s not enough to worry about, money managers currently need to sell a sizeable amount of US dollars to satisfy portfolio rebalancing requirements at Tuesday’s 1600 GMT fixing time.
The week is chock full of top-tier US economic reports including Eurozone and Canada GDP on Tuesday; New Zealand employment data and China Manufacturing PMI on Wednesday, and US nonfarm payrolls on Friday.
FX traders may be a tad cautious while they wait to see if anything develops from President Trump’s threat to shut down the US government. Yesterday he tweeted “I would be willing to 'shut down' government if the Democrats do not give us the votes for Border Security, which includes the Wall! Must get rid of Lottery, Catch & Release etc. and finally go to system of Immigration based on MERIT! We need great people coming into our Country!”
Then he got distracted and sent a flurry of tweets railing against the Mueller investigation.
New York has been cautiously selling US dollars since it walked in, with the Canadian dollar the best performing G10 currency by a nose. Expectations of a robust May GDP print (forecasted at 0.3% versus April's 0.1%), firmer oil prices, a better outlook for Nafta, and potential month-end USDCAD selling have undermined USDCAD.
EURUSD and GBPUSD have traded higher on the back of the month-end flow story but EURUSD remains trapped inside last week’s 1.1620-1.1750 range.
Oil prices continued to be underpinned by escalating Iran/US tensions as the possible loss of Iran crude supply more than offsets the recent Opec production increase.
Wall Street opened with a negative bias. Tech stock concerns have pushed the NASDAQ lower while Caterpillar’s (CAT: NYSE) upgrade to its full-year profit outlook gave the DJIA a bit of support.