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USD / CAD - Canadian dollar sinks with falling oil

- Oil prices slide on hawkish outlook for US interest rates.

- Australia blames RBA for bungling inflation outlook.

- US dollar rangebound overnight.

USDCAD snapshot: open 1.3465-69, overnight range 1.3453-1.3479, close 1.3459, WTI $77.75, Gold $1999.71

The Canadian dollar is sinking as oil prices slide.

West Texas Intermediate (WTI) broke below post-Opec production cut support at $78.20/barrel and is targeting further losses to $74.40. Oil prices soared at the end of March when Opec along with Russia announced it would cut crude production by an additional 1.1 million barrels/day.

The cartel justified the cut as a precautionary measure need to support price stability in the wake of the US banking crisis. The move was also aimed at squeezing speculators who had sold oil contracts.

The post-announcement oil gains are in the process of being reversed as traders downgrade their expectations that the Fed will cut interest rates in the summer. Now, the first cut isn’t expected until November.

Bank of Canada Governor Tiff Macklem testified before the House of Commons Banking Committee on Tuesday. He repeats his performance today in front of the Senate Banking Committee.

He reiterated is forecast of inflation dropping to 3.0% in the summer, but cautioned that the risk to that outlook was tilted to the upside.
Elsewhere, the US dollar traded sideways due to a lack of direction.

Asian equity activity was subdued. Japan’s Nikkei 225 index eked out a 0.18% gain, while Australia’s ASX 200 index finished almost unchanged.

European bourses are trading negatively led by a 0.71% drop in the German DAX index while S&P 500 futures are down 0.70%, WTI lost 1.4% and the US 10-year Treasury yield dipped to 3.57% from yesterday’s close of 3.602%.

There will not be a shortage of Fed-speak today. Investors will hear from New York Fed President John Williams, Governor Christopher Waller, Cleveland Fed President Loretta Mester, and Governor Michelle Bowman.

EURUSD traded in a 1.0948-1.0978 range trapped by support at 1.0900 and resistance at 1.1000. EURUSD upside is fueled by expectations for higher ECB interest rates while the Fed gets ready to put an end to rate increases.

GBPUSD traded in a 1.2417-1.2451 range supported by fresh expectations for a more hawkish Bank of England rate outlook.

USDJPY bounced 134.40-134.97 range with some modest support seen after a report that the BoJ will not tweak its yield curve control (YCC) policy at the next meeting.

AUDUSD traded in a 0.6669 to 0.6725 range overnight. The RBA was chastised for bungling inflation forecasts when the results of a 2022 inquiry into the central bank’s performance were released today. Among the recommendation was a call to reduce the power of the Governor.