USDCAD open 1.3568-72, Overnight Range: 1.3567-1.3599, WTI open $40.28, Gold $1810.97
- Canadian dollar gains lag those of the Antipodean currencies
- US dollar on defensive as EU Summit drags on
- US dollar opens with a mild risk-seeking bias
The Canadian dollar drifted higher with FX traders is a risk-seeking mode. Traders anticipate that the European Union Summit would close with a COVID-19 Relief Fund deal. The meetings are already in overtime and set to resume today.
France and Germany are spearheading a €750 COVID-19 Relief Fund composed of €500 billion in grants and the balance in loans. Spain and Italy would be the biggest beneficiaries of the grants. However, the entire 27 member EU needs to agree on the plans, or there can’t be a deal.
Austria, the Netherlands, Sweden, and Denmark are opposed to grants or taking on debt to support spendthrift nations, and they also want a veto on how the money is spent.
EURUSD rallied on hopes that the EU leaders would come to terms.
EURUSD climbed from 1.1411 to 1.1467 and has hovered around the 1.1450 area since Toronto opened.
GBPUSD rallied, climbing from an Asia low of 1.2520 to 1.2640 in Toronto, boosted by EURGBP selling, as a hedge against EU talks failing.
However, GBPUSD gains may be capped due to concerns about Brexit, and weak economic data which may force the Bank of England to cut rates into negative territory.
AUDUSD and NZDUSD traded sideways in a narrow range. Both currency pairs were underpinned by a 2.98% surge in Chinas’ Shanghai Shenzhen CSI 300 index, and by broad US dollar weakness.
Oil prices chopped lower. Opec’s decision to eliminate the 2.2 million barrel per day emergency production cut is weighing on prices. WTI is also undermined by concerns that the fresh spike in coronavirus cases in the US would delay an expected increase in demand from a global economic recovery.
Canadian dollar traders are looking for some evidence that the Canadian economy will rebound. That may happen tomorrow with the release of Retail Sales data for May.
Economists are forecasting a gain of 20%. However, even a 20% increase will leave Retails Sales down 16.3% for the year.
Canada inflation data is due Wednesday. CPI is forecast to rise 0.4% in June. The results are likely to be ignored. Last week the BoC indicated that inflation is expected to remain low for a long time, and until it rises to the 2.0% target, interest rates will be unchanged.
The US and Canadian economic data cupboards are bare today. EU Summit headlines will drive FX direction.
