- Bank of Japan decision disappoints traders.
- French political turmoil sours risk sentiment.
- US dollar posts gains overnight-EUR is the worst performing currency.
USDCAD: open 1.3760, overnight range 1.3734-1.3767, close 1.3742, WTI $78.33, Gold, $2322.81
Canadian dollar traders were mostly bystanders yesterday and overnight. USDCAD traded in a 1.3710-1.3767 band in the past 24 hours, with prices supported by broad-based US dollar strength stemming from a spike in global risk aversion. In addition, widened CAD/US interest rate differentials in favor of the US are also undermining Canadian dollar sentiment. Speeches from BoC Governor Tiff Macklem and Deputy Governor Sharon Kozicki did not offer any fresh insight into the BoC monetary policy outlook.
Oil prices are not having much impact on the Canadian dollar despite WTI rising gently from 77.72 to 79.09 in early NY trading. Oil is supported by the rise in the US dollar, but fears of increased supply starting in October are slowing gains.
The Bank of Japan disappointed those expecting it to announce the onset of quantitative tightening. The BoJ said that the announcement will not occur until the July meeting, at which time the details of the program will be unveiled. The news sparked a bout of short-covering in USDJPY, which served to broadly support the greenback against the other major currencies.
EURUSD traded poorly, falling from 1.0745 to 1.0671, and the technical outlook is negative while prices are below 1.0750. The news that election polls suggest Marine Le Pen’s right-wing party will trounce President Macron’s socialists in the July 4 election sank the single currency. There are also concerns that the EU Commission could put France into Excessive Debt Procedure (EDP).
GBPUSD traded in a 1.2694-1.2764 range due to broad US dollar strength and the French election but received a bit of support from speculation that the UK election on July 4 means that the Bank of England will not cut rates at next Thursday’s meeting.
USDJPY traded erratically in a 156.87-158.27 range. The top was reached after the BoJ disappointed traders and failed to announce lower monthly bond purchases, which squeezed short USDJPY positions. Then, comments from Governor Kazuo Ueda saying rates could rise as early as July drove USDJPY to the low.
AUDUSD traded in a 0.6621-0.6642 range with prices under pressure due to the increase in negative risk sentiment.
Canada Manufacturing Sales and Wholesale sales data are on tap, as is the Michigan Consumer Sentiment Index.
