The USDCAD remains unchanged and will likely stay that way till tomorrow. The Bank of Canada has its regular update and will potentially hike interest rates a quarter percent, analysts have given an eighty-five percent chance. Oil is over $74 USD a barrel for West Texas Intermediate, disruptions in supply have now increased with Norwegian output being cut due to a strike. This adds to the disruptions in Canada, Libya, Venezuela, and Iran, all of which have had a significant impact on global production levels. Both Saudi Arabi and the U.S. shale oil producers have said that they can fill any void, but the amount of money spent on new exploration and infrastructure has decreased dramatically, that if the demand for oil was to suddenly increase, the U.S. in particular couldn’t keep up.
USDCAD 1.3100, 1.3090, 1.3075 1.3135, 1.3145, 1.3168
USD-CAD has recouped back above 1.3100 after yesterday posting a three-week low at 1.3066, which extended the correction from a one-year high that was pegged at 1.3387 in late June. Expectations for the BoC to hike rates this week, along with the big surge in oil prices have being buoying the Canadian dollar, though this theme has now looked to have come to a pause. We expect the BoC to hike interest rates on Wednesday by 25 bp, which would take the overnight target rate to 1.50%. The accompanying monetary policy report should be consistent with additional rate increases, though at a gradual pace. USD-CAD has support at 1.3053-55, and resistance at 1.3150-53.
EUR-USD printed a new two-session low at 1.1721, extending the retreat from the three-week high seen yesterday at 1.1790. A broad dollar bid has driven the move, with demand having picked up out of recent lows. We continued to see EUR-USD as being in a broadly consolidative phase, which has been unfolding for over a month now, and which followed a six-week down phase from levels above 1.2400. The range over this sideways period has been 1.1508 to 1.1851. More of the same looks likely for now. A major “known unknown” is to how deep and how prolonged the Trump-led trade war with major economies will be, and what economic and currency market fallout this will cause. This is, for now, curtailing directional commitment.