- Canada’s economy is not expected to show any growth in March.
- A slightly softer US PCE -Price Index is anticipated.
- US dollar trading defensively due to month end and improved risk sentiment.
USDCAD: open 1.3646, overnight range 1.3630-1.3690, close 1.3679, WTI $77.86, Gold, $2343.52
The Canadian dollar is saying a fond farewell to a choppy but ultimately directionless month of May. The month was characterized by constantly shifting views on Fed monetary policy which bounced between unchanged for longer and hopes for an early easing, with the risk of a rate hike tossed into the works this week. All in all, it left USDCAD shuffling between 1.3590 and 1.3750 for most of the month.
That could change today on a combination of weaker than expected US PCE deflator data and negative growth for the Canadian economy. If so, the US dollar would come under pressure against the G-10 major currencies and the Canadian dollar would rise in sympathy. However, Canadian dollar gains may lag because if both central banks are cutting rates, the CAD US interest rate spreads should be unchanged.
Canada March GDP is expected at 0% compared with 0.2% in February while the PCE deflator data is expected to be unchanged.
Wall Street closed with losses on Thursday, but Asian equity indexes did not get the memo. Japan’s Nikkei rallied 1.14% and Australia’s ASX 200 gained 0.96%. Chinese markets were deep in negative territory. European bourses are trading slightly lower except for the UK FTSE 100 index which is up 0.39%. S&P 500 futures are down 0.18% while the US 10-year Treasury yield is at 4.55%.
EURUSD traded bullishly in a 1.0811-1.0856 range boosted by higher than expected Eurozone HICP data which rose 2.6% year over year compared to April’s 2.4% result.
GBPUSD drifted in a 1.2700 to 1.2739 range while ignoring UK house price data. Trading was subdued as traders awaited the US PCE report.
USDJPY traded in a 156.57-157.37 range, supported by Japanese economic data that suggest the Bank of Japan could raise rates in July.
Industrial Production fell 0.1% in April compared to the forecast for a 0.9% increase. However, that news was offset by higher inflation and firm retail sales.
AUDUSD is at the top of its 0.6626-0.6658 range despite poor Chinese PMI data. May Manufacturing PMI was 49.5 which was below the 50.4 expected and the 50 result in April. Non-Manufacturing PMI was 51.1 vs. forecast 51.5.
