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USD / CAD - Canadian Dollar steady into CPI

- Canadian inflation data on tap.

- BoC Governor predicting economic soft landing.

- US dollar mixed in uneventful trading.

USDCAD: open 1.3659, overnight range 1.3641-1.3663, close 1.3659, WTI $81.23, Gold, $2333.22

The Canadian dollar is steady as the earlier US dollar sell-off against the major G-10 currencies fades. Canadian dollar gains are limited by the domestic interest rate outlook which is expecting lower rates. The market is pricing a 65% chance of a July rate cut and 100% by September. Today’s inflation results could change that view if May CPI rises more than the 0.3% m/m that is expected.

Bank of Canada Governor Tiff Macklem donned his forecasting hat and predicted that the Canadian economy was in for a soft landing, in a speech in Winnipeg yesterday. He noted that the gradual increase in unemployment to 6.2%, just above pre-pandemic levels, and the reduction in job vacancies without massive layoffs indicate a smooth adjustment in the labor market. Higher interest rates have cooled demand and balanced the job market, supported by strong immigration.

Oil prices are firm. WTI traded in a 81.06-81.89 range with prices underpinned by simmering Israel and Lebanon (Iraq) tensions and speculation of a sharp reduction in North American oil inventories in the summer.

EURUSD is steady in a 1.0720-1.0745 range. Topside gains may be capped by concerns about an election win by the National Party in France. The NP has said that they plan on cutting taxes by EUR 7 billion, in a move partially funded by reducing France’s contribution to the European Union budget.

GBPUSD is going with the flow inside a narrow 1.2680-1.2702 range due to an abundance of caution ahead of Friday’s US PCE Price index data and the July 4 election. The UK economic calendar was empty.

USDJPY is choppy in a 159.20-159.71 range. Gains are capped by intervention fears which were reinforced by yesterday’s comments from Finance Minister Shunichi Suzuki. However, steady US Treasury yields and lingering fallout from the somewhat hawkish FOMC meeting on June 12 are limiting the downside.

AUDUSD drifted in a 0.6650-0.6673 range. Consumer sentiment rebounded to 1.7% in June from -0.3% in May, but the news was overshadowed by caution ahead of tomorrow’s inflation data. CPI is expected to have risen by 3.8% y/y in May compared to 3.6% in April.

Todays US data includes: The US economic calendar has the Chicago Fed National Activity Index, Redbook Index, Housing Price Index, S&P Case-Shiller Home Price Index, and June Consumer Confidence