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USD / CAD - Canadian Dollar Adrift

- Bank of England leaves rates unchanged.

- Focus shifts to US data, including jobless claims and Philly Fed

- US dollar opens with a slight bid.

USDCAD: open 1.3716, overnight range 1.3704-1.3721, close 1.3719, WTI $80.67, Gold, $2335.06

The Canadian dollar drifted with a modest bid in an uneventful overnight session due to caution ahead of today’s US data and the Bank of England monetary policy decision.

The Bank of Canada Summary of Deliberations revealed that policymakers considered waiting until July’s meeting to cut rates. It was probably just lip service as Governor Macklem had virtually preannounced a rate cut prior to the June 5 meeting. The Summary revealed that “While they recognized the risk that progress could stall – as it had in the United States – there was consensus that with four consecutive months of easing in core inflation and indicators suggesting continued downward momentum, there had been sufficient progress to warrant a first cut in the policy rate.” A couple of years ago that kind of movement was considered “transitory,” and a reason not to act.

EURUSD traded in a 1.0713-1.0749 range and is clawing back losses after the Swiss National Bank cut interest rates by 25 bps to 1.25%. The SNB justified its move by noting that underlying inflation pressures have decreased. Traders remain cautious ahead of the French election on June 30.

GBPUSD dropped to 1.2679 from 1.2708 after the Bank of England surprised no one and left interest rates unchanged at 5.25% in a 7-2 vote. The usual two dissidents, Swati Dhingra and Dave Ramsden, again voted to cut rates to 5%. Traders are more focused on the July 4 UK election and an expected new Labour government.

USDJPY rose from 157.93 to 158.51 on the back of higher US Treasury yields. One of the reasons for USDJPY weakness is that, according to Bloomberg, Japanese Life companies have reduced their hedge ratios to 47%, the lowest level since 2011. The lack of hedging flows removes some downside selling pressure.

AUDUSD traded narrowly in a 0.6661-0.6680 range with prices underpinned by the somewhat hawkish bias implied by RBA Governor Michele Bullock. The odds for a rate hike are 20% after she said that the board considered raising rates while not discussing a rate cut at all.

Today’s US data includes, May Building Permits, Weekly jobless claims, housing starts, and Philadelphia Fed Manufacturing Survey. Canada’s New Housing price index is also on tap.