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USD / CAD - Canadian Dollar Retreats

- ECB deciding whether to hike 25bps or 50bps

- WTI oil prices slide

- US dollar rebounds in light trading

USDCAD Snapshot open 1.2914-18, overnight range 1.2862-1.2925, close 1.2881, WTI oil $95.55, Gold $1684.28

The Canadian dollar gave back all of yesterday's early morning gains, then consolidated those losses overnight.

Traders ignored Wednesday's inflation report release, even though it was hotter than in May. Statistics Canada wrote, "The rate of consumer inflation continued to rise, reaching 8.1% year over year in June, following a 7.7% gain in May. The increase was the largest yearly change since January 1983. The acceleration in June was mainly due to higher gasoline prices, however, price increases remained broad-based with seven of eight major components rising by 3% or more."

Typically, the data would have sent the Canadian dollar soaring as it implies a robust Bank of Canada response. However, the BoC anticipated the high reading and raised interest rates by 1.00% at last week's monetary policy meeting.

Canadian dollar traders turned to oil prices for direction. West Texas Intermediate peaked at $103.95/barrel Wednesday and dropped 9.0% to $94.62/b in early NY. Prices are in a bit of a relief retreat after Russia started pumping gas through the Nord Stream 1 pipeline, albeit at 40% capacity. Prices also dropped on fears of weaker demand in the US and China and renewed supply from Libya.

The ECB will raise interest rates for the first time in 11 years today. The only question is whether it's 0.25% or 0.50%. EURUSD rallied to 1.0230 in Asia, partly on hopes for a 0.50 bp hike, then dropped to 1.0167 as traders second-guessed themselves.

Sure, there was a lot of background noise, including Russia, restarting gas pumps into the Nord Stream 1 pipeline, although the flow is only 40% of capacity.

Italian politics are in chaos, a common bi-annual state. That led to rising Italian bond yields and weaker European stock markets and threw a wrench into the ECB's soon-to-be-announced bond fragmentation tool.

GBPUSD is near the bottom of its 1.1922-1.2022 range due to UK political uncertainty and broad US dollar strength.

The Bank of Japan surprised no one when they left interest rates and monetary policy unchanged.

USDJPY traded firmer in a 138.00-138.87 band.

AUDUSD and NZDUSD were weighed down by broad US dollar demand

Today's US data includes weekly jobless claims (forecast 24,000) and Philadelphia Fed Manufacturing Survey (forecast 0, previous -3.3)