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USD / CAD - Canadian dollar awaits January inflation data.

- Canada CPI expected to dip to 3.3% y/y from 3.4% in December.

- PboC surprises markets and cuts 5-year LPR.

- US dollar opens with small losses.

USDCAD: open 1.3477-81, overnight range 1.3476-1.3512, Friday close 1.3491, WTI $77.75, Gold, $2026.18

The Canadian dollar started today’s session right where it started on Friday which made it the worst performing G-10 currency. The New Zealand dollar was the best performing currency after it posted a 0.98% gain.

Canadian and US markets were closed yesterday which gave all the incentive needed for traders in other regions to remain on the sidelines.
A lack of actionable economic data encouraged the malaise. That will also be the story this week, at least as far as the US is concerned.

Canadian dollar traders are patiently awaiting this morning’s January inflation numbers but whatever the result, it will have little bearing on the Bank of Canada’s (BoC) interest rate decision on March 6. Governor Tiff Macklem and his colleagues have repeatedly said that inflation is too high and that they need to see evidence of a sustainable, downward trend before easing policy. A hotter than expected result could see a short-lived Canadian dollar sell-off, but it doesn’t mean a BoC rate hike is in the cards.

Attention will quickly shift to Wednesday’s release of the FOMC minutes from the January 31 meeting. In his post-meeting press conference, Fed Chair Powell seemed to rule out a rate cut in March and nothing in the minutes is likely to contradict that comment.

The PBoC cut the 5-year Loan Prime Rate to 3.95% from 4.20% which was a surprise to markets. However, they left the 1-year LPR unchanged, and traders were not impressed.

The Canadian dollar is not getting any benefit from oil prices which fell from Friday’s peak of $79.28 to $77.45 following the China rate cut news. Oil prices fell on renewed concerns that China’s economic woes will continue to weigh on oil demand.

EURUSD is near the top of its 1.0762-1.0810 range due to broad-based but minor US dollar selling pressures.

GBPUSD traded in a 1.2579-1.2616 band with comments from BoE Governor Andrew Bailey weighing on prices. He expects CPI to hit its target this year which reduces the odds of a rate hike.

USDJPY climbed in a 149.88-150.44 range due to the steady to firm US 10-year Treasury yield holding at 4.28%.

AUDUSD rallied in a 0.6521-0.6562 range due to slightly hawkish RBA minutes and the PBoC rate cut.

The US economic calendar is empty.