Oil is now below $68 USD a barrel for West Texas Intermediate, it is also below its 50-day moving average, OPEC countries are fulfilling their earlier commitments of ramping up production. The USDCAD has remained within its recent band of 1.3060-1.3220, and it needs to breakout one way or the other before there is a significant move. It has touched the 1.3200 level today, and it will likely need oil to drop below $65 USD a barrel before reaching 1.3220.
USD-CAD has ebbed to a four-session low of 1.3110, driven lower by general weakness in the U.S. Dollar, and despite the sharp retreat in oil prices yesterday and in recent sessions. The BoC hiked interest rates by 25 bp last Wednesday, and guided markets for tighter monetary policy to keep inflation near target met expectations, though the statement emphasized a “gradual approach, guided by data.” USD-CAD has support at 1.3087-90, which encompasses the current position of the 50-day moving average, and resistance at 1.3146-68.
EUR-USD lifted to a four-session high of 1.1744, with gains once again being driven by broader selling of dollars. We still retain an overall bearish view of EUR-USD based on strong U.S. economic growth and the Fed’s tightening course, while any move from Trump to follow-through on hits threats to tariff car imports — which he looks to be gearing up for, describing the EU as a “foe” over the weekend — would presumably be negative for the Euro relative to the Dollar. EUR-USD has support at 1.1695-1.1700.
The Pound lifted in the wake of the UK labour data, though follow-through buying proved to be limited after BoE Governor Carney warned of “big economic consequences” to the economy in the event of a no-deal exit from the EU during parliamentary testimony. Carney did stress that it would be “premature” for the central bank to make judgements on the government’s recently publish policy document on Brexit, and he also emphasized that the UK banking sector was appropriately capitalised for a cliff-edge Brexit scenario. UK labour data came in near expectations, with unemployment remaining at 4.2% in May, which is the joint lowest rate since 1975, and average earnings coming in with nominal increases of 2.5% y/y and 2.7% y/y in the ex- and with-bonus figures, respectively, in the three months to May. The data should maintain expectations for the BoE on course for a rate hike in August, with inflation-adjusted incomes growing modestly, though at the same time the numbers are strong enough to make a tightening on August 2 a done deal just yet (the OIS market has been pricing in about 70% probability for a 25 bp in the repo rate in August). Cable posted an intraday peak of 1.3268 before retreating under 1.3250, leaving yesterday’s peak at 1.3293 untroubled. Given the apparent disorderly final phase of the Brexit process we retain a bearish view of Sterling. Cable has resistance at 1.3281-82 and 1.3293-95, levels that encompasses a daily high and the present situation of the 50-day moving average.