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USD / CAD - Canadian Dollar rising

- US Core PCE Price index expected at 2.6% y/y (previous 2.8%)

- Tame BoJ sinks yen.

- US dollar trades defensively except against JPY and MXN.

USDCAD: open 1.3657, overnight range 1.3637-1.3663 close 1.3659, WTI $83.93, Gold, $2349.39

The Canadian dollar rode the coattails of broad US dollar weakness after US Q1 earnings reports stoked risk sentiment.

US tech giants, Alphabet and Microsoft earnings beat analyst estimates, and the news lifted global equity indexes. Asian markets closed with gains except Australia’s ASX 200, which lost 1.39% on diminished RBA rate cut hopes. The German DAX index has gained 0.76% and is leading European bourses higher, while S&P 500 futures are up 0.69%. The gains are despite the US 10-year Treasury yield hovering around the 4.70% level.

The Canadian dollar gains may not be sustainable. That’s because the US economy is vastly outperforming compared to Canada’s despite 525 bps in Fed rate hikes. A spate of recent economic data reports indicates that inflation in the US is starting to turn upwards, which suggests the Fed will be in no hurry to cut rates. Meanwhile, in Canada, the sluggish domestic economy and inflation levels inside the Bank of Canada’s target zone suggest policymakers will cut rates, with many economists believing the move will happen in June. If so, it does not bode well for the Loonie.

Traders have been keenly awaiting today’s US PCE Price Index data. Core PCE is expected to be 2.6% compared to 2.8% y/y while headline PCE will be 2.6% compared to 2.5% y/y. A hotter than expected result will rekindle US dollar demand while a lower than expected number may lead to additional US dollar selling.

EURUSD traded in a 1.0718-1.0753 range supported by better than expected Eurozone data recently.

GBPUSD is trading in the middle of its 1.2494-1.2541 range after recouping its post-US data losses on Thursday. Traders are mulling over recent comments from Bank of England officials that suggest UK rates could remain elevated for longer.

USDJPY dropped to 155.00 from 156.82 on the heels of the BoJ decision, then climbed to 156.68 in NY. The BoJ left rates unchanged at 0.0-0.1% and slightly modified inflation and GDP forecasts. Governor Ueda seemed wishy-washy about the level of the yen, which was seen as a signal to buy USDJPY.

AUDUSD rallied from 0.6517 to 0.6554 on the back of higher than expected Q1 PPI (actual 4.3% y/y vs previous 4.1%), which more than offset soft import-export price data.

Michigan Consumer Sentiment Index is ahead