– G-7 Finance Ministers meeting in Banff, Alta, begins tomorrow.
– Wall Street shrugs off Moody’s downgrade of US debt to Aa1, from Aaa.
– US dollar trickling lower.
USDCAD: open 1.3962, overnight range 1.3935-1.3969, close 1.3960, WTI 61.60, Gold 3209.40
Canadians are returning to their desks after a somewhat soggy, windy and chilly May long weekend that affected the entire country. Leaf fans continue to drown their sorrows after playoff failures extend to 58 consecutive years.
USDCAD dropped due to broad US dollar selling pressure yesterday after Friday’s news that Moody’s downgraded it US debt rating by one notch to Aa1 from Aaa. They are a little late to the party considering that S&P downgraded US debt 14 years ago in Q2 2011. It consolidated the losses overnight.
Canada headline inflation is expected to rise 1.6% y/y compared to 2.3% in March while the BoC’s Core CPI measure is forecast to rise 0.2% m/m from 0.1% previously.
WTI oil prices traded sideways in a 61.00-62-62.67 range with traders assessing the implications of Iran US nuclear talks and a possible Russia Ukraine ceasefire against the backdrop of global trade uncertainty.
Markets shrugged off the downgrade of U.S. debt by Moody’s. Wall Street stumbled briefly but ended Monday with modest gains. Asia picked up the momentum with the ASX 200 climbing 0.58%, the Hang Seng jumping 1.49%, while Japan’s Topix stayed flat. European stocks are trading higher, led by the DAX gaining 0.53%, though S&P 500 futures are down 0.28%. U.S. 10-year yields retreated to 4.458% after touching 4.58%.
EURUSD traded in a 1.1218–1.1278 range overnight, consolidating yesterday’s gains. Comments from ECB officials were mixed—Belgium’s central banker Pierre Wunsch suggested rates might need to drop below 2.0%, while Isabel Schnabel flagged global trade tensions as a potential inflationary threat. German PPI data fell 0.6% m/m, a slight improvement from March’s -0.7%.
GBPUSD ranged between 1.3345 and 1.3395 overnight after Monday’s price action boosted prices from a low of 1.3251 to 1.3404, the U.S. debt downgrade. However, the rally cooled as BoE Chief Economist Huw Pill commented that rate cuts may have been overly aggressive. He clarified that his vote to hold rates steady was a pause, not a full stop.
USDJPY was on the defensive in a 144.09–145.51 range overnight. A sharp rise in Japanese bond spreads, from 2.97% to 3.13%, weighed on prices while tariff concerns remained front and center. Japan’s Economic Minister reiterated Tokyo’s call for an end to U.S. tariffs.
AUDUSD gave up Monday’s gains and dropped from the peak to the low in the wake of the RBA interest rate decision. The RBA delivered a widely expected 25 bp rate cut and signaled uncertainty ahead. Governor Michele Bullock said additional easing is still on the table, which weighed on the currency.