English
USD/CAD traces stable oil over 1.3100, focuses on US Retail Sales and Michigan Consumer Sentiment CSI
After reaching to levels not seen since November 2020, USD/CAD has remained stagnant. Oil prices anticipate China data and busy markets for a continuation of the corrective rebound from the five-month low. Market mood improves as hawkish bias on the Fed's next move eases, Fedspeak is mixed, and statistics are mixed. Updates on the G20, US statistics, and Fedspeak should not be missed for clear guidance.
After climbing to a 20-month high, the USD/CAD is hovering around 1.3120 as traders anticipate major data/events during Friday's Asian session. The recent inactivity between the Loonie and the U.S. dollar may possibly be related to the slow pricing of WTI crude oil, Canada's primary export earner.
However, WTI crude oil fails to continue yesterday's recovery from the lowest levels since February, falling 0.45% to $93.45 as of press time.
Fears of a recession are diminishing, and investors have mixed feelings about the Federal Reserve's rapid rate rises. Fedspeak and US statistics may have contributed to the USD/CAD decline from its multi-month high.
James Bullard, president of the Federal Reserve Bank of St. Louis, and Christopher Waller, governor of the Federal Reserve, were among the main Fed speakers who attempted to downplay the likelihood of increased interest rates. However, Fed's Bullard stated, "So far, we've framed this discussion primarily in terms of 50 versus 75." According to Reuters, Fed's Waller stated that markets may have gotten ahead of themselves by pricing in a 100 basis point rate rise in July. It should be noted that Fed officials will observe a blackout period beginning this weekend before the July 28 Federal Open Market Committee meeting (FOMC).
The US Bureau of Labor Statistics reported that the Producer Price Index (PPI) for final demand in the United States increased by 11.3 percent annually in June, up from 10.9 percent in May. This result exceeded the market's forecast of 10.7 percent. In addition, there were 244,000 Initial Jobless Claims for the week ending July 9 compared to the prior week's figure of 235,000 and the market's forecast of 235,000. Weekly Unemployment Claims reached their highest level in five months.
On a separate page, the diminishing differential between the 2-year and 10-year US Treasury rates pressured USD/CAD bulls the day before. However, 10-year US Treasury rates closed Thursday around 2.95 percent, up 0.95 percent intraday, while 2-year bond coupons declined 0.75 percent to 3.12 percent. Consequently, the spread between the coupons of short-term and long-term bonds decreased to 17 basis points (bps) from 23 bps on Tuesday.
In the near future, US Retail Sales, anticipated to increase 0.8% MoM in June from -0.3% in May, will precede preliminary readings of the Michigan Consumer Sentiment Index (CSI) for July, anticipated to decrease to 49.9 from 50.0 before, to guide short-term USD/CAD movements. However, Fedspeak will be of greater importance to pair traders.
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