- China cuts 1 year rate
- Global equity rally stalls, Wall Street futures fall
- US dollar jumps-CAD worst performer
USDCAD Snapshot open 1.2903-07, overnight range 1.2775-1.2913, close 1.2774, WTI oil $88.27, Gold $1779.48
The Canadian dollar is sinking and is the worst performing G-10 currency since Friday’s NY open.
USDCAD surged from 1.2738 on Friday morning to 1.2914 in NY trading today. The 1.4% gain is due to a steep drop in West Texas Intermediate (WTI) oil prices and broad US dollar demand after The Peoples Bank of China (PboC) trimmed some interest rates.
The Chinese news is the more significant catalyst. The PboC responded to slumping economic growth by cutting the 1-year Medium Term Lending Facility by 10 bps to 2.75% and 7-day reverse repo to 2.0%. Weaker than expected Industrial Production and Retail Sales reports for July also weighed on global sentiment. Traders fear that China’s economic problems, which include high youth unemployment and a real estate crisis are worsening and will be a drag on the global growth outlook.
West Texas Intermediate (WTI) oil dropped 8.0% from Friday’s peak, which exacerbated Canadian dollar selling. Oil prices suffered from broad-based US dollar demand and from reports that Iran and the US are close to agreeing on a new Nuclear deal. If so, Iran will soon be able to contribute around 4.0 million barrels/day to the global oil supply.
EURUSD traded in a 1.0187-1.0267 range after trading sideways in Asia and then dropping in Europe. EURUSD is weighed down by divergent Fed/ECB interest rate policies and by the negative impacts on the Eurozone economy from the Russia/Ukraine war.
GBPUSD fell from 1.2147 to 1.2052 due to the resurgent US dollar, ongoing issues from Brexit, and political uncertainty.
USDJPY climbed from 132.97 to 133.59 after the PboC rate cut sparked broad US dollar demand. Weaker than expected, Japanese GDP data (actual 2.2% y/y vs forecast 2.5%) didn’t help yen sentiment.
AUDUSD fell to 0.7024 from 0.7124 following the PboC action. Traders are awaiting the release of the RBA minutes from the July 5 meeting.
NZDUSD traded in a 0.6358-0.6454 range ahead of Wednesday's RBNZ monetary policy meeting. The RBNZ is widely expected to raise rates 0.50%.
Canada Manufacturing Sales (forecast -0.9% m/m, previous -2%) and Wholesale Sales (forecast 0.5%, previous 1.6% m/m) are due. The US economic calendar is empty.
