- Falling oil prices weigh on Loonie.
- US Treasury yield plunge sinks US dollar.
- US dollar opens with losses across the board except against CAD and MXN
USDCAD: open 1.3694, overnight range 1.3621-1.3700, close 1.3626, WTI $72.77, Gold, $2330.35.
The Canadian dollar got trampled after oil traders re-evaluated their outlooks for crude prices. On Sunday, OPEC announced it was extending its production cuts until the end of 2025, which supported crude prices briefly. However, the cartel also decided to roll bank some productions cuts beginning in October before phasing them out entirely within a year. That was a bad news because traders were already concerned about slowing global demand and they became even more unhappy with the thought of increased production in that environment. WTI oil fell from 77.52 yesterday to 72.48 overnight.
The Canadian dollar was also pressure because the Bank of Canada is likely to cut interest rates on Wednesday. Weak economic growth and dovish comments by Governor Tiff Macklem suggest a 25 bp cut on Wednesday.
Canadian dollar traders also ignored broad-based US selling pressure after the US ISM PMI data was weaker than expected. May’s Manufacturing PMI was 48.7 which was below the 49.6 expected and raised hopes that the Fed would cut rates sooner than expected.
Bond traders thought so and they knocked the US 10-year Treasury yield down to 4.38% this morning from 4.512% at Friday’s close.
Traders are awaiting today’s JOLTS job openings data to see if it will confirm that the labour market is easing.
EURUSD rallied from 1.0828 to 1.0906 yesterday, then rose to 1.0916 in Asia before sliding down to 1.0865 in NY. German unemployment data did not cause much of a reaction. However, gains may be limited ahead of Thursday’s ECB meeting.
GBPUSD mirrored EURUSD and rallied from 1.2700 yesterday to 1.2818 in Asia overnight before dropping to 1.2755 in NY. Traders are looking ahead to Friday’s US employment report and the July 4 UK election.
USDJPY dropped from 157.46 to 155.96 in the wake of yesterday’s ISM PMI data, which drove the US 10-year Treasury yield down to 4.39% from 4.45%.
AUDUSD is back at yesterday’s low after trading in a 0.6631-0.6699 range overnight due to lower commodity prices, including a sharp drop in iron ore prices this week.
