USD / CAD - Canadian Dollar Gnawing at Resistance

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- Surging US Treasury yields turn risk sentiment negative

- Australia’s central bank raises rates 0.50%

- US dollar opens strongly, JPY underperforms

USDCAD Snapshot: open 1.2560-64, overnight range 1.2551-1.2579, close 1.2558, WTI open $121.84, Gold open $1,848.74

The Canadian dollar stagnated in a quiet overnight session. The US dollar eked out small gains against the majors except for the Canadian dollar, which firmed slightly from where it closed on Wednesday.

The Canadian dollar continues to consolidate gains with prices supported by oil prices and the Bank of Canada interest rate outlook.

West Texas Intermediate (WTI) dipped yesterday when the Energy Information Administration (EIA) reported weekly crude inventories rose 2.02 million barrels rather than fall 1.91 mb, as expected. The move was quickly reversed after the United Arab Emirates (UAE) Energy Minister said oil prices are not even close to peaking. He told a conference, “If we continue consuming, with the pace of consumption we have we are nowhere near the peak, because China is not back yet.” He added that Opec cannot guarantee sufficient oil supplies without increased investment.

WTI rose from a low of $119.40 on Wednesday to 122.69/b overnight.

The Canadian dollar continues to benefit from Bank of Canada (BoC) Deputy Governor Paul Beaudry’s post-monetary policy meeting comments. Mr Beaudry said the BoC needed to prevent inflation from becoming entrenched. That means “which may need to raise the policy rate to the top end or above the neutral range to bring demand and supply into balance and keep inflation expectations well anchored.”

Asia equity markets closed with small losses except for Japan’s Nikkei 225, which was flat. European equity indexes have drifted lower ahead of today’s European Central Bank meeting, while US equity futures are slightly higher.

The 10-year US Treasury yield retreated from 3.05% in Asia to 3.026% in early NY trading.

This morning’s ECB monetary policy meeting is expected to clarify the bank’s plans to begin normalizing policy in July. President Christine Lagarde seemed to preempt the meeting when she wrote about the subject in a blog on May 23. She stressed the need to balance inflation with economic growth downside which is exacerbated by the Russian invasion of Ukraine.

EURUSD traded with a modest bid in a 1.0695-1.0745 range.

GBPUSD tracked EURSD moves. There were no notable UK data reports, but traders remained concerned about recession risks which a rail strike may exacerbate.

USDJPY traded in a 133.20-134.55 band and is at the bottom of the range after the US 10-year Treasury yield slipped.

AUDUSD and NZDUSD were rangebound.


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