- Divergent Fed and BoC policies weighing on Loonie
- Oil falls on optimism for US and Iran deal
- US dollar opens mixed after quiet overnight session
USDCAD open: 1.3825, overnight range 1.3804-1.3830, close 1.3813, WTI 89.89, Gold 4,488.24
The Canadian dollar drifted lower but remained in familiar territory, undermined by a widening interest rate gap between the US and Canada. The Fed's hawkish lean contrasts with the BoC's constrained position, where a soft labour market is limiting the central bank's room to tighten.
Bank of Canada Deputy Governor Nicolas Vincent added to that narrative on Tuesday, cautioning that the domestic jobs market is settling into a low-hire, low-fire pattern. He noted that while elevated unemployment would normally point to economic slack addressable through rate cuts, that logic breaks down when the joblessness reflects structural rather than cyclical forces.
WTI crude drifted lower in an 89.65 to 93.68 range as optimism over a potential US-Iran agreement reduced anxiety about tightening global crude inventories.
There are no real developments in the US-Iran war. Iranian delegates returned from Qatar and are reviewing the latest US proposal, though officials maintain that distrust of America remains a core obstacle. That sentiment was reinforced when the US struck Iran again on Monday.
With the US economic calendar empty, surging AI stock valuations and caution ahead of tomorrow's PCE price index release are the primary drivers of direction.
Asian equities closed mixed, with Australia's ASX 200 gaining 0.69% while Japan's Topix shed 0.52% and Hong Kong's Hang Seng dropped 1.06%.
As of 7:20 am, the French CAC 40 has risen by 0.82%, the German DAX is up 0.49% and the UK FTSE 100 has gained 0.16%. S&P 500 futures are up 0.34%, the 10-year Treasury yield is at 4.475%, and the DXY is 99.11.
EURUSD gained in 1.1625-1.1650 range, underpinned by expectations that the ECB will raise rates in June and from optimism that a US-Iran deal could restore full Hormuz traffic. Steady to firmer US Treasury yields are tempering the advance.
GBPUSD slipped to its session low in early New York trade, trading in a1.3438 -1.3460 band. Geopolitical uncertainty is keeping the dollar supported and capping sterling, though two expected BoE rate hikes this year are providing a floor.
USDJPY inched higher in a 159.18-159.45 range, lifted by firmer Treasury yields and the absence of any Iran-US resolution. A hawkish Fed tilt and BoJ reluctance to move on rates are keeping USDJPY bid.
AUDUSD traded negatively in a 0.7131-0.7180 range after April CPI came in at 4.2% year-on-year, which was below the 4.4% forecast, debasing the case for another RBA hike. Additional pressure came from AUDNZD selling after the RBNZ held rates at 2.25% in a 4-3 vote that the market read as hawkish.
