USD/CAD is trapped in a $1.2050-$1.2150 trading band with month-end demand for U.S. dollars underpinning prices while rising oil prices limit gains.
Canadian dollar direction continues to be dictated by U.S. developments, including economic growth outlook, inflation, and President Biden’s latest budget plan. U.S. economic reports continue to highlight the outperformance of the American post-pandemic economic recovery compared to other G-10 economies.
Yesterday, U.S. jobless claims were a pandemic low of 406,000, and Q1 Gross Domestic Product was unchanged at 6.4%. However, Durable Goods Orders and Pending Home Sales were below forecasting which tempered enthusiasm but still underpinned Wall Street.
The positive equity sentiment continued overnight. Asia equity indexes closed higher led by a 2.10% gain in Japan’s Nikkei 225. Australia’s ASX 200 closed a record high. European stock indexes are also posting are Wall Street futures.
Biden’s $6.0-trillion budget proposal is unveiled today, which will give traders something to chew on. It is merely a "wish list" and just kicks off a prolonged budget negotiation.
The People's Bank of China pushed back on the surging Yuan rate. The central issued a statement saying that CNY can’t be used as a tool to spur exports or offset the impact of commodity prices. "The key is to properly manage expectations, firmly crack down on attempts to manipulate the market or 'maliciously' create one-sided expectations. Enterprises and financial institutions should adapt to a two-way fluctuation of the exchange rate."
EUR/USD is at the bottom of its $1.2165-$1.2200 range due to month-end U.S. dollar demand, and position adjustment ahead of the U.S. long weekend. European Central Bank Executive Board Member Isabel Schnabel said she was reasonably confident that the Eurozone economy had reached a turning point, but monetary policy support would remain in place until March 2022. Eurozone ESI economic confidence saw its highest reading since January 2018, climbing to 114.5 from 110.5 in April. The failure of EUR/USD to break above $1.2250 risks a move below 1.2140 to 1.1950.
GBP/USD is trading at the bottom of its overnight $1.4175-$1.4207 range due to broad U.S. dollar strength vs the majors. Trading enthusiasm has waned today as the U.K. is close for Spring Bank Holiday on Monday.
U.S. PCE, Personal, Spending, Personal Consumption, Chicago Purchasing Manufacturers Index, and Michigan Consumer Sentiment reports should stoke inflation fears ahead of traders making an early exit to start the long weekend.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
