USD / CAD – Canadian Dollar rally stalls

– Rising equity prices lift global risk sentiment.

– Oil price drop may be acting as a drag on Canadian dollar gains.

– USD opens quietly after dull overnight session.

USDCAD: open 1.3710, overnight range 1.3689-1.3715, close 1.3701, WTI $81.98, Gold, $2295.66

The Canadian dollar rallied yesterday but ran out of gas and consolidated the move overnight. USDCAD dropped from 1.3754 to 1.3686 on Monday, then inched higher overnight partly because West Texas Intermediate (WTI) oil traded lower.

WTI is trading at the bottom of its 81.42-83.01range after Middle East tensions eased somewhat.

China and US trade tensions are bubbling to the surface again. This time the US may sanction some Chinese banks who have been supporting Russia’s war effort in Ukraine. If so, it has severe repercussions for Chinese trade in Europe as payments could be disrupted.

EURUSD drifted inside a 1.0638-1.0696 band. A modest improvement in German Composite PMI (actual 50.5, previous 48.3) and a similar result in the Eurozone Composite PMI provided some support.

GBPUSD traded poorly in a 1.2330-1.2389 and was unable to get any support from improving PMI data. That’s because UK and Interest rate spreads are very wide (in favour of the US). Analysts expect the BoE to cut rates by 150 bps more than the Fed.

USDJPY inched higher in a 154.66-154.87 range fueled by steady to firm US Treasury yields. The US 10-year Treasury yield traded around the 4.62% area, underscoring the JGB/US yield differential. Better than expected Japanese PMI data was not a factor. Japan’s Finance Minister Shunichi Suzuki hinted at joint intervention after meeting with his counterparts from the US and Korea. He said, “I won’t deny that these developments have laid the groundwork for Japan to take appropriate action, though I won’t say what that action could be.”

AUDUSD was directionless in a 0.6441-0.6465 range April PMI data was mostly ignored as traders await the inflation report due on Wednesday.

Todays US data is second tier.

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