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USD / CAD - Canadian dollar dead in the water

- Risk sentiment is modestly positive ahead of US quarterly earnings reports.

- Euro area PMI data slight better than forecast.

- US dollar opens with tiny gains after dull overnight session.

USDCAD snapshot: open 1.3365-69, overnight range 1.3349-1.3383, close 1.3368, WTI $81.61, Gold $1937.97

The Canadian dollar is dead in the water. Holidays in Asia and the upcoming release of a trove of US quarterly earnings reports has sidelined traders.

Traders are awaiting tomorrows Bank of Canada monetary policy meeting.

The Bank of Canada (BoC) is expected to raise interest rates by 25 basis points, bringing the key interest rate to 4.50%. But the predictions are far from unanimous. There is a contingent that thinks the BoC will remain on hold, which if correct, would sink the Canadian dollar.

The statement accompanying the rate decision will be closely watched for any explicit signal of the end of the rate hike cycle.

Along with the rate decision, the BoC will also release its Monetary Policy Report, which will cover inflation and growth forecasts and the output gap.

The BoC begins a new policy of releasing minutes from the meeting and they will be released for the first time on February.

EURUSD traded in a 1.0853-1.0897 range. Euro area and German and PMI reports were modestly better-than-forecast which supported prices as they raised hopes that the economies would return to growth. ECB officials including President Christine Lagarde continued to offer hawkish comments on interest rates.

GBPUSD dropped from 1.2412 to 1.2292 in early NY trading after UK Services PMI data was weaker than expected. The Chief Business Economist at S&P Global, Chris Williamson wrote, “Weaker than expected PMI numbers in January underscore the risk of the UK slipping into recession. Industrial disputes, staff shortages, export losses, the rising cost of living and higher interest rates all meant the rate of economic decline gathered pace again at the start of the year.”

USDJPY rallied from 129.74 to 130.72 before giving back half of those gains in NY. Demand from higher US Treasury yields continues to clash with expectations that the BoJ begins to tighten monetary policy soon.

AUDUSD is trading in a 0.7015-0.7048 range, supported by the reopening of China’s economy and anticipation of increased demand for commodities.

There are no top-tier US or Canadian economic reports today.