- Reserve Bank of Australia raises rates.
- Oil prices slide despite Saudi production cut plans.
- US dollar mildly softer.
USDCAD snapshot: open 1.3417-21, overnight range 1.3392-1.3449, close 1.3444, WTI $70.91, Gold $1962.46.
The Canadian dollar was thwarted in its attempts to break out of its range and extend recent gains.
The currency followed the Australian dollar higher after the Reserve Bank of Australia surprised markets and raised its benchmark rate to 4.10% from 3.85%, a gain of 25 bps. Many analysts opined that Wednesday’s Bank of Canada (BoC) monetary policy meeting could have a similar outcome.
There are many similarities to decisions by the two central banks. For starters, the RBA announced a rate hike pause in April. It justified the decision because inflation was falling, and the economy needed time to adjust to previously announced tightening. The BoC used a similar argument in March.
The odds that the BoC announces a rate increase tomorrow are around 50/50. The decision is a statement only affair and Governor Macklem delegated outgoing Deputy Governor Paul Beaudry to explain the reasons on Thursday. To many, that means no change in policy.
The Canadian dollar rally stalled partly because oil prices fell. WTI oil dropped from $72.00 to $70.16 and continued to give back the gains that occurred after Saudi Arabia announced a unilateral production cut effective July 1.
The major Asian equity indexes were directionally challenged. Japan’s Nikkei 225 index gained 0.90% while Australia’s ASX 200 fell 1.20%.
European bourses are trading defensively with the UK FTSE 100 falling 0.26% and leading the parade lower. S&P 500 futures are close to unchanged. Gold prices have climbed 0.32% while the WTI is down 2.50%. The US 10-year Treasury yield is steady at 3.67%.
EURUSD traded in a 1.0683-1.0732 range and is trading at 1.0694 in NY. Eurozone retail sales fell 2.6% y/y in April compared to 3.3% in March which was revised lower.
GBPUSD firmed in a 1.2404-1.2458 range due to broad US dollar weakness and expectations for Bank of England rate hikes.
USDJPY retreated from 139.65 to 139.11 then clawed back some gains to reach 139.45 in NY.
AUDUSD rallied from 0.6611 to 0.6684 following the surprise RBA rate hike.
