The Canadian dollar had an uneventful overnight session, as did the rest of the G-10 majors. Traders ignored yesterday’s April Retail Sales data. The drop of 5.7% m/m was weaker than expected but not a surprise due to restrictions implemented to combat the third-wave coronavirus outbreak.
The Canadian dollar was underpinned by steady to firm crude oil prices. West Texas Intermediate is consolidating gains in a $72.70-$74.00/barrel range. The Energy Information Administration (EIA) said U.S. crude inventories fell 7.6 million barrels, a tad more than last week’s 7.3 million-barrel drop. The news helped offset reports that the Organization of the Petroleum Exporting Countries is contemplating increasing crude production by as much as 500,000 barrels/day starting August 1.
The cartel believes that rebounding global growth means a surge in oil demand which will readily absorb higher production. The current price level suggests traders agree.
Federal Open Market Committee policymakers in the States continue to yammer. Atlanta Fed President Raphael Bostic, a noted hawk and voter said, he was one of the dots suggesting a 2022 rate. However, he is not a voter in 2022. Governor Michelle Bowman, who has a vote, echoed Fed Chair Powell’s dovish view.
GBP/USD rallied since Monday, rising from a low of $1.3790 to $1.4000 yesterday in anticipation the Bank of England would turn hawkish, despite most analysts forecasting unchanged monetary policy. The analysts were correct as the BoE left monetary policy untouched. GBP/USD had consolidated in a narrow $1.3950-$1.3985 range overnight, but dropped to $1.3907 after the BoE announcement.
EUR/USD traded in a $1.1919-$1.1949 range. A better than expected German IFO survey underpinned prices, which suggests the German economy’s post-pandemic rebound is gathering steam. However, EUR/USD gains were capped to the contrasting monetary policy outlooks between the Fed and European Central Bank. FOMC policymakers projected two interest rate hikes in 2023, while ECB officials expect to leave easy monetary policies intact.
Canadian dollar direction is at the mercy of US dollar sentiment, which is relatively positive ahead of today’s data dump and Fed speakers.
Traders will have a ton of economic data and more Fed-speak to digest today. US Durable Goods Orders, Weekly Jobless Claims, Wholesale
Inventories, and Q1 Gross Domestic Product are on tap, along with speeches from Fed policymakers Raphael Bostic and John Williams.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
