USD / CAD – Canadian Dollar bounces back

– US markets close early today.

– FOMC minutes and plenty of US data on tap.

– US dollar retreats, posting losses across the board.

USDCAD: open 1.3678, overnight range 1.3663-1.3756, WTI $82.86, Gold, $2347.03

The Canadian dollar stepped back from the edge of a cliff yesterday, managing to keep its two-week range intact. As usual, the Canadian dollar gains were a result of developments south of the border.

Traders re-evaluated their outlook for US rates after Fed Chair Jerome Powell, speaking from Portugal, expressed some optimism about the direction of inflation, saying the data “suggest that we are getting back on the disinflationary path. We want to be more confident that inflation is moving sustainably down toward 2% before we start loosening policy.”

USDCAD dropped from a peak of 1.3756 yesterday in Asia to a low of 1.3667 overnight. It could have fallen further except that there is a chunky $850 million, 1.3660, option strike maturing today at 10:00 am. Position adjustments between the seller and the buyer of the option often result in choppy trading around the expiry window.

There are a ton of US economic releases today including ISM PMIs, ADP employment change, weekly jobless claims, trade balance, and factory orders. The FOMC minutes are released this afternoon, but the impact from the deliberations has likely been diminished by Powell’s comments yesterday.

US markets will be closing early today ahead of the July 4th Independence Day holiday and there are many economic reports on tap today. They include weekly jobless claims, factory orders, ISM PMI data, and the trade balance. The minutes from the June 14 FOMC meeting are released this afternoon.

EURUSD rallied to 1.0764 from 1.0736 despite mixed Eurozone Composite and Services PMI data. The German results disappointed but it was offset by the Eurozone results. EURUSD gains are limited ahead of the July 7 French elections.

GBPUSD traded in a 1.2674-1.2708 range and is at the top of that band in early NY trading. UK Services PMI was 52.1 in June (forecast 52.2) while Composite PMI was 52.3 (forecast 51.7). The data and Powell’s comments are underpinning prices.

USDJPY rallied to 161.99 from 161.39, as traders continue to ignore Bank of Japan officials’ verbal intervention and continue to focus on Japanese/US interest rate differentials which favour the US. The US 10-year Treasury yield is 4.42%.

AUDUSD traded in a 0.6665-0.6684 range. The currency pair got a lift after May Retail Sales rose more than expected (actual 0.6%, forecast 0.2%) which raised the risk that the RBA would hike interest rates this year.

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