– BoC Business Prospects Survey highlights rising inflation concerns.
– 0.3% of Canada’s projected GDP for April
– Closing the first half with a stronger US dollar
USDCAD Snapshot Open 1.2925-29, Friday-Monday range 1.2837-1.2985, close 30 June 1.2873, WTI Oil $108.71, Fri $1803.28
The Canadian dollar has traded unevenly since Canada Day on July 1st and Independence Day on July 4th. A combination of declining rebalancing flows since late June and growing recession concerns in a holiday-shrinking trade environment have rocked the currency.
Analysts believe a US recession is inevitable, even if the Fed disagrees. Fed officials believe it will successfully lower inflation at high levels and keep the US economy growing. Analysts are expecting a recession. The only debate is whether it will be moderate or serious.
Because of these fears, the 10-year Treasury yield fell from 3.48% on June 14 to 2.894% in NY today. They also crashed the US stock market. The S&P 500 closed on 30 June with its worst H1 performance since 1970.
The start of July was not very good. Global sentiment is a risk-averse propensity to drive demand for the US dollar. The Canadian dollar extended its decline overnight in NY trading after S&P 500 futures retreated to overnight lows.
Asian equity markets ended modestly higher, with the exception of the Nikkei 225 index, which rose 1.03% in quiet trading. European stocks are all running losses on fears of a recession, while French CAC is leading the decline, falling 1.02%.
WTI oil traded in the 104.60-$111.30 band and is staying at 108.00 in NY. Prices continue to be supported by tight supply from Russian sanctions and production problems in Libya. JPM analysts estimate that if Russia cuts its oil production to 5 million barrels a day, the oil could soar to $380 a barrel. Because it will hurt the Western economy more than Russia. “Thank you for the idea,” Putin said.
EURUSD was trading at the bottom of the range of 1.0281-1.0448 overnight. The single currency is being hit by punitive measures against Russia and fears of an imminent recession due to rising inflation concerns. A series of weak economic reports lowered the risk of an aggressive ECB rate hike.
GBPUSD closed at 1.2179 on Thursday and closed at 1.1975 on Friday morning. The price rebounded yesterday at 1.2165 and retreated to 1.2024 in NY today. The UK economy is exacerbating the crisis in the aftermath of Brexit.
AUDUSD traded in the 0.6765-0.6892 band after Thursday’s close. The price has steadily declined after peaking before the RBA rate announcement. The RBA raised rates by 0.50% as expected and made little change to its forward guidance.
US factory orders are expected at 0.5% in May compared to 0.3% in April.
