Trading remains thinner than normal, Canada’s monthly GDP comes out Thursday, expect continued range trading. The USD bounced back against most currencies on comments by European Central Bank Governing Council member Erkki Liikanen that underlying euro zone inflation may remain lower than expected even if growth is robust. Traders used this as a reason to unwind their recent long euro trades.
USDCAD 1.2842, 1.2838, 1.2828 1.2879, 1.2895, 1.2908
USD-CAD is down for the fifth out of the last six sessions, today posting two-week lows under 1.2820. News of progress on the NAFTA front, with the U.S. last week dropping its contentious auto-content proposal, along with firmer oil prices, have given the Loonie a footing. We expect more of the same for now. Resistance is at 1.2884-85.
EUR-USD dove back toward 1.2400 after running in early London trading to a six-week high of 1.2476. A broader euro bid drove the earlier gain before a broader dollar rally drove the correction from highs. The gain had been seen despite sub-forecast German import price data, which shows the potential for euro gains (which were a cause for the 0.6% y/y decline) to crimp ECB tightening expectations, should they sustain. Perhaps the data had a delayed impact on market thinking, while the latest Eurozone ESI economic confidence indicator subsequently undershot expectations. In the bigger view, EUR-USD has settled near the midway levels of a consolidation range that’s been seen for nearly two months now, which follows a 14-month rally phase from sub-1.0500 levels. We anticipate more of the same for now. Support comes in at 1.2324-25, and 1.2400.
Sterling has come under particular pressure today. Cable has tumbled from intraday highs near 1.4245 to sub-1.4150 levels, breaching both yesterday’s low at 1.4152 on route and a trend-line support at 1.4176-77. A combo of a rebound in the dollar, stop orders and the latest BoE Financial Policy Committee report, which highlights Brexit risks, have conspired to pressure Cable and the pound more generally. The BoE’s Monetary Policy Committee had also repeated its concern about Brexit-related uncertainties on business and household spending. We have continue to see Cable as being in process of establishing a range in the low-to-mid 1.4000s, after rising from early-March levels near 1.3700.