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USD / CAD - Canadian Dollar depressed

- US Markets closed Monday for Memorial Day

- Canada March retail sales expected to be flat.

- US dollar giving back some of yesterday’s gains.

USDCAD: 1.3725, overnight range 1.3712-1.3740, close 1.3729, WTI $76.26, Gold, $2337.52.

The Canadian dollar fell sharply yesterday after a couple of US economic reports and a hawkish Fed policymaker comment shone a spotlight on divergent Fed and Bank of Canada interest rate outlooks. US weekly jobless claims fell by 8,000 to 215,000 in the week ending May 17, which renewed fears that the labor market was still very tight. Then S&P Global PMI data came out stronger than expected, and together they supported Fed Chair Jerome Powell’s view that the economy is still too strong to entertain easing monetary policy. That sent the US dollar higher, commodity prices lower, and knocked Wall Street for a loop.

The S&P 500 index closed with a loss of 0.74%, and Asian equity markets followed the lead. Japan’s Nikkei 225 fell 1.17%, the Australian ASX 200 dropped 1.08%, and Hong Kong’s Hang Seng index fell 0.44%. European bourses opened in negative territory but are off their worst levels. The UK FTSE 100 and Dax indices are down 0.36%. S&P 500 futures are defying the trend and have gained 0.26% in early NY trading.

The release of the Canadian March Retail Sales data won’t matter to Canadian dollar traders. The report is expected to be flat, and the results impacted by the very early Easter holidays.

EURUSD saw a slight uptick, moving from 1.0805 in Asia to 1.0842 in New York. German GDP for Q1 increased by 0.2% quarter-over-quarter, aligning with predictions. Prices received some backing after ECB hawk Isabel Schnabel advised policymakers to proceed cautiously to avoid premature rate cuts.

GBPUSD is attempting to recover from yesterday’s decline, rising from 1.2677 to 1.2722 in New York. The improvement is bolstered by slightly better risk sentiment and an uptick in GfK Consumer Confidence data, which climbed two points to -17 from -19 in April. Trading was light due to the UK holiday on Monday.

USDJPY bounced in a 156.89 to 157.15 band. Prices were underpinned by higher US Treasury yields and a more hawkish Fed interest rate outlook. Japan CPI rose 2.5% year-over-year compared to March's 2.7% increase. The news supports a dovish BoJ interest rate outlook.

AUDUSD is attempting to recover from yesterday's losses, climbing from 0.6592 to 0.6619 in early New York trading, as the US dollar weakens against major currencies. Monday is a holiday in Australia.

Today’s US data includes April Durable Goods Orders (forecast -0.8% vs March 2.6%) and Michigan Consumer Sentiment (forecast 67.5 vs previous 67.4).