Yesterday, USDCAD initially declined from 1.3145 down to 1.3115 before climbing to hold a 1.3152 – 1.3167 range for the balance of the day. Overnight, USDCAD climbed to 1.3188 before extending to 1.3195 after U.S. 2nd quarter GDP data came in better than expected. The pairing dropped to 1.3175 before a 2nd wave of buying tested the 1.3199 level (a new 1 month high). That was short-lived as USDCAD has since pulled-back towards 1.3175 again. The probability of a 50 basis point interest rate cut at next weeks Fed meeting has declined from 60% down to 21% since last Thursday.
U.S. stocks fell amid a torrent of corporate results, while the euro rallied and European government bond yields lingered near record lows as the region's central bank signaled the need for significant stimulus as its growth outlook deteriorates. The S&P 500 dropped from a record and the Dow Jones Industrial Average eased for a second day as investors digested a flood of earnings. 3M advanced after beating estimates, while Tesla plunged on weak results. Ford slumped as the gloom in the global auto industry spread. PayPal dropped and Dow was flat after results. Amazon and Alphabet highlight after-hours reports. The euro rose versus the dollar and Treasuries fell after Mario Draghi left rates unchanged but said a "significant degree" of monetary stimulus is appropriate.
The USD/CAD pair traded with a mild positive bias for the fourth consecutive session on Wednesday and is currently placed at session tops, just below mid-1.3100s. After the previous session's late pullback from near one-month tops, the pair managed to regain some positive traction on Wednesday, albeit a combination of diverging forces failed to provide any meaningful impetus. The US Dollar stood tall near five-week tops and remained well supported by the fact that investors continued scaling back expectations of a 50 bps rate cut by the Fed at its upcoming monetary policy meeting on July 30-31.
U.S. stocks rose as investors assessed a batch of strong earnings and signs of progress in trade talks with China. Treasuries fell and the dollar rose. Optimism was also helped by a possible deal on the U.S. debt limit with an initial bipartisan agreement to raise it and thusly remove another layer of uncertainty for the markets moving forward.
Technology shares led gains among U.S. stocks following a mixed session in Europe and Asia as investors looked ahead to a busy week of corporate earnings. The Dow Jones Industrial Average turned negative. Stocks slipped throughout Asia, led by declines in Shanghai and Hong Kong as traders watched escalating tensions there. Treasuries advanced after traders pared bets the Federal Reserve will slash rates by a half-point this month. Oil rose again, heading for its biggest gain in more than a week, after Iran's seizure of a British tanker fanned concerns of a confrontation that could disrupt Middle East supplies. Core European government bonds gained, while the pound slumped after a forecast showed Brexit may have already pushed the U.K. into a technical recession, and as Conservative Party members vote on a new leadership. Investors will be eyeing earnings this week for signs of economic slowdown and any indication that trade strife is affecting companies' bottom lines. On the trade front, Chinese state media reported face to face negotiations with the U.S. may resume soon. The Fed meanwhile, is in a blackout period with regard to policy communications ahead of next week's interest rate decision.
Yesterday, USDCAD initially declined from 1.3060 down to 1.3041 before climbing to 1.3095 – a 1 week high. The pairing then declined to 1.3016 in late trade – the lowest since Oct. 24, 2018. The broad USD declines came after several dovish comments made by NY Fed member Williams. The probability of a 50 basis point interest rate cut at the upcoming FOMC meeting jumped from 34% up to 59%. The New York Fed issued a statement overnight back-tracking some of the comments and the USD broadly recovered although USDCAD held near 1.3030 for much of the overnight session. Canadian retail sales for May came in weaker than expected sending USDCAD from 1.3050 up to 1.3110 – an 8 day high and a break above recent resistance at 1.3090/95. The move was short-lived with pair falling back to 1.3066 despite the USD holding its gains elsewhere.
U.S. stocks dropped as investors weighed corporate earnings and the outlook for global trade. Treasuries fell. The S&P 500 extended losses into a 3rd day on mixed earnings results. Benchmark 10-year yields climbed as the Philly Fed survey of factory activity surged the most in a decade.
U.S. Stocks fell as investors assessed mixed corporate earnings amid fresh trade tension. While early indications are usually unreliable when it comes to earnings season, investors have closely watched corporate reports for clues on the state of the world's largest economy amid the lingering threat of a trade war. Market sentiment was clearly dented after President Trump said Tuesday he could impose more tariffs on China. The Federal Reserve Beige Book, a snapshot of economic performance around the country, is due later today.
Steve Brown, Senior Corporate Trader | Stevebrown@vbce.caThe USD was the worst performing currency this week on the back of dovish testimony from Fed Chairman Powell Wednesday morning along with dovish FOMC meeting minutes released later that day. The CAD was largely unchanged against the other major currencies although the EUR and GBP held near 2 year lows while the AUD remained lower too near a 9 year low. USDCAD held a 1.3050 – 1.3143 range heading into Wednesday's session. The prepared remarks from the Fed Chairman Powell sent the USD broadly lower taking USDCAD from 1.3138 down to 1.3070. He cited that "uncertainties since the June FOMC continue to dim the outlook" and noted the "risk (that) weak inflation will be even more persistent." The Bank of Canada statement came next and was perhaps a bit more dovish than expected. There was no hint of rate cuts and the Bank did upgrade Q2 growth from 1.3% up to 2.3%. However, it did warn that trade conflicts and uncertainty could affect GDP by as much as 2% by 2021. USDCAD climbed back towards the weekly high at 1.3144. The move higher was short-lived as a combination of the broader USD weakness, a surge in oil prices (oil jumped nearly 6% on the EIA report as inventory declined by nearly 10 million barrels vs. an expected draw of just 3 million barrels), and the inability to break above the 1.3140 / 50 technical resistance level prompted a move lower in USDCAD. The pairing moved to session lows @ 1.3062 after the release of the FOMC meeting minutes which noted that many Fed officials saw a stronger case developing for interest rate cuts. The downtrend continued into Friday's session with USDCAD testing the 1.3017 level – the lowest level since Oct. 24, 2018. There was a brief correction up to 1.3090 (matching the high from Thursday) before the pairing eased lower to close the week at 1.3028. The U.S. Fed decision is July 31 with the market now pricing in a 73.4% probability of a 0.25% rate cut and a 26.6% chance of a 0.50% rate cut. Just 6 weeks ago, the probability that rates would be kept unchanged was 82%.
Treasuries slumped and the dollar rallied after solid U.S. retail sales and factory output added to signs the world's largest economy is holding up just nicely Thank you. Stocks edged lower as traders assessed mixed results from Big Bank earnings.
U.S. stocks were mixed at the start of a busy week for corporate earnings, economic data and Federal Reserve speakers. Treasuries climbed while the dollar was little changed. The S&P 500 Index fluctuated near 3,000 as Citigroup Inc slid after posting worse-than-estimated trading revenue. Steelmakers jumped after Donald Trump's trade aide Peter Navarro said the president will sign an executive order boosting the use of the material in federal government contracts. After the first giant U.S. bank kicked off the earnings season, other heavyweights including JPMorgan Chase & Co., Wells Fargo & Co. and Goldman Sachs Group Inc get ready to report their results on Tuesday. Also this week, investors will be sifting through speeches by Federal Reserve officials after Chairman Jerome Powell signaled he stands ready to cut interest rates to bolster growth and lackluster inflation. Investors also assessed data showing that China's economy slowed to the weakest pace since quarterly data began in 1992 amid the ongoing trade standoff with the U.S., while monthly indicators provided signs that a stabilization is emerging.
Garo Mavyan | Retail FX & Precious Metals Trader
In its most recent decision, the Bank of Canada announced that it would leave its key interest rate unchanged at 1.75%. Though anticipated, this outcome marks the sixth straight meeting that the bank has elected to keep the interest rate steady, as it cites the potential for a return to domestic economic growth. The decision seemed to reinforce the perspective of Bank of Canada Governor Stephen Poloz, who for months has maintained that the recent 'soft patch' in the Canadian economy was temporary. Based on recently released data, it would appear that Poloz finally has the evidence he needs to support his view that things are on the rebound: GDP grew by 0.3% on a monthly basis in April to surpass market expectations, Canada's trade balance was in a surplus position in May as exports rose by 4.6%, and the Canadian Dollar has gained about 4.3% on the US Dollar as oil prices continue to climb.
Yesterday, USDCAD moved from 1.3076 down to 1.3041 before briefly climbing to 1.3090. The pairing then declined to 1.3057 in late trade. Overnight, USDCAD dropped to 1.3017, the lowest rate since Oct. 24, 2018. The pairing has moved back up towards 1.3050 this morning. Overall, the USD is fairly stable today after having lost ground for much of this week. The USD has been the worst performing currency this week as dovish comments from Fed Chairman Powell earlier in the week have increased rate cut odds despite the fact that 10 year treasury yields have risen from 1.95% up to 2.15% over the past week towards 1 month highs. Probability of a 50 basis point rate cut by the Fed at the end of the month has risen from 5.4% up to 26.6% this week
U.S. stocks pushed toward new highs and Treasuries retreated after the latest American inflation reading came in hotter than anticipated. The dollar dropped for a second day and gold slipped.
The S&P 500 tested 3,000 again Thursday while the Dow Jones Industrial Average flirted with 27,000 as investors weighed the latest clues on the path for monetary policy. Health-care shares gained after the Trump administration pulled the plug on a proposed overhaul of drug rebates.Federal Reserve Chair Jerome Powell, who struck a dovish tone in questioning before a congressional panel Wednesday, is due back on Capitol Hill today to answer senators' questions. Traders will be eyeing that testimony for further clues after a measure of U.S. consumer prices rose more than forecast in June.
As expected, the Bank of Canada left interest rates unchanged at 1.75%. The USD/CAD pair reversed an early dip to 1.3070 region and spiked to 2-week tops following the announcement. After consolidating in a narrow range through the early part of Wednesday's trading session, the pair came under some intense selling pressure in reaction to the Fed Chair Jerome Powell's dovish sounding remarks in the prepared statement to Congress. The downtick, however, turned out to be short-lived and the pair witnessed a dramatic turnaround, rallying around 60-70 pips. The USD/CAD is now at 1.3115.
U.S. stocks followed European shares lower at the open as markets extended a downbeat start to the week. The dollar strengthened to its highest level since mid-June. The S&P 500 Index declined Tuesday morning as investors await more clues on the path for U.S. monetary policy. Trading may stay choppy ahead of key testimony this week from Federal Reserve Chair Jerome Powell as observers assess prospects for easing following conflicting signals on the global economy. Treasuries slipped, while gold dropped for a fourth day.
After advancing to 1.3130 on Friday following the employment figures from the United States and Canada, the USD/CAD pair retraced a large portion of its gains ahead of the weekend and started the new week under modest bearish pressure. However, the greenback seems to be preserving its strength with the US Dollar Index posting modest gains at 97.30 and suggests that the pair's losses are likely to stay limited. Additionally, the barrel of West Texas Intermediate is consolidating Friday's gains, losing 0.5% on the day around mid-$57s and making it tough for the commodity-linked loonie to gather momentum. In the second half of the day, the subdued trading action is likely to continue in the absence of significant macroeconomic data releases. The next important event for the pair will FOMC Chairman Powell's speech on Tuesday. Although he is supposed to deliver prepared remarks on the effectiveness of stress testing on large banks at an event organized by the Federal Reserve Bank of Boston, investors will be looking for clues regarding the policy outlook. Canadian economic docket will feature housing starts and building permits data tomorrow as well
The USD/CAD pair gained nearly 70 pips in a matter of minutes following the employment data releases from Canada and the U.S. to touch its highest level of the day at 1.3138. In Canada the unemployment rate rose to 5.5% in June amid a 2,200 decrease in the number employed and weighed on the loonie. In the U.S. non-farm payrolls increased by 224k in June to surpass the market expectation of 160k by a wide margin. The press release also showed that the wage inflation, as measured by the average hourly earnings, stayed unchanged at 3.1%. The U.S. labour market is on fire and the Federal Reserve officials can sit back and enjoy the fireworks. While the central bank is set to cut interest rates as the end of the month, the upbeat non-farm payrolls diminish the chances of a deep cut of 50 basis points that investors have wished for.
European equities and U.S. stock futures edged higher on Thursday in a lackluster session marked by thin trading volumes thanks to the American holiday. Gold slipped but stayed above $1,400 and WTI futures fell. The Stoxx Europe 600 Index turned modestly higher, with real estate firms and telecoms boosting the gauge. Contracts on the S&P 500 Index also nudged up after Asia's benchmark finished higher overall thanks to gains in Japan and South Korea. Trading volumes were well below average across the board, with U.S. markets shut and investors counting down to Friday's American jobs report.
U.S. stocks advanced to fresh records in thin trading ahead of the holiday tomorrow in the States. The rally in global bonds extended as investors weighed the prospect of more dovish appointees to two of the world's major central banks. The USD fell after jobless claims came in broadly as forecast and private hiring numbers missed expectations. A reading on the services sector fell to the lowest since 2017, but Wednesday's batch of data did little to move markets, with jobs numbers coming Friday. Europe's leaders have nominated Christine Lagarde to take the helm of the ECB later this year, ushering in a candidate analysts anticipate will take up departing President Mario Draghi's mantle in providing stimulus. And U.S. President Donald Trump said he's planning to nominate Christopher Waller and Judy Shelton to serve on the Fed Board, candidates both seen as likely to advocate lower interest rates. Meanwhile, Cleveland Fed President Loretta Mester said she'd need to see more data before supporting an immediate rate cut, while many of her colleagues are leaning toward loosening policy. Elsewhere, oil rebounded after tumbling Tuesday. Shares in Japan, China and South Korea led losses in Asia as equities in Australia edged higher. The yen strengthened after the Bank of Japan made small tweaks to its bond buying program.