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USD / CAD - Canadian Dollar survives BoC rate cut, for now

- Bank of Canada rate cut undermines Loonie

- ECB will cut rates 25 bps but deliver tame guidance.

- US dollar opens narrowly mixed compared to close.

USDCAD: open 1.3687, overnight range 1.3666-1.3698, close 1.3695, WTI $74.41, Gold, $2361.56.

The Canadian dollar dropped sharply in the wake of the BoC decision to cut rates by 25 bps to 4.75% and because of dovish comments by Governor Tiff Macklem. Mr. Macklem predicted that "If inflation continues to ease, and our confidence that inflation is headed sustainably to the 2% target continues to increase, it is reasonable to expect further cuts to our policy interest rate."

Those words drove USDCAD from 1.3665 to 1.3743. The rally would have continued except a couple of US economic reports raised the odds that the Fed would cut rates in September to about 67%. ADP Employment change rose far less than expected (actual 152,000 vs forecast 173,000) while ISM services Prices Paid ticked lower. Positive risk sentiment accelerated and USDCAD gave back all of its gains in overnight trading.

FX traders are jockeying for position ahead of Friday's employment report and are hoping today's weekly jobless claims data supports forecasts for another drop in nonfarm payrolls.

Asian equity indexes followed Wall Street higher. Australia's ASX 200 rose 0.68%, followed by a 0.55% gain in Japan's Nikkei 225 index. European bourses are deep in positive territory with the German Dax gaining 0.66%. S&P 500 futures are flat.

EURUSD drifted in a 1.0869-1.0896 band. The ECB's expected 25 bp rate cut is reflected in the currency pair, suggesting today's decision is a non-event. President Christine is expected to leave guidance unchanged as well. Eurozone Retail Sales fell 0.5% compared to March 0.7% m/m, which also weighed on the currency.

GBPUSD traded negatively in a 1.2775-1.2809 range although better than expected UK Construction PMI (actual 54.7, April 53.0) provided a bit of support.

USDJPY traded choppily in a 155.38-156.38 range. Prices are supported by the sharp drop in US Treasury yields this week. The 10-year Treasury yield has fallen from 4.51% last Friday to 4.30% today.

AUDUSD traded defensively in a 0.6643-0.6683 range. Australia's trade surplus widened by $1.7 million, which helped to limit the downside.
Today's Canadian data includes International trade, while the US calendar has Trade, and weekly jobless claims