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Canadian Consumer Price Index YoY Meets Forecasts

CAD - Canadian Dollar

Canadian CPI figures are the most significant fundamental for the loonie this week. Market participants will use the data to place bets on the Bank of Canada's next move when it comes to interest rates. CPI month over month for June printed above forecasts of -0.3% at -0.2%. The data is below May's number of 0.4%. On a year over year basis and the most important for all the CPI readings, the print came in at a median of 2.0% below the previous of 2.4%. So with inflation waining for the Canadian economy, the Bank of Canada should be comfortable to maintain its current holding pattern when it comes to its benchmark interest rate. The Canadian dollar lost fell against its US counterpart at the release of 8:30 am this morning and is currently holding just under at our first resistance level 1.3071 (.7650). Support for the loonie again comes in at 1.3029 (.7675). WTI crude oil has slipped below 60 dollars a barrel overnight to 58.21. The fall in oil prices comes from easing in the tensions with US-Iran. Iran said the US is welcome to come back to the negotiating table; the US did turn down the offer defusing tensions in the Middle East for the time being.

Key Movers

The United States Dollar was the most influential performer overnight and enjoyed broad-based gains against several counter parties. Well supported by domestic data, the US DXY surged 0.46% to reach 97.38 against a basket of currencies despite Fed Chair Powell reiterating the risks to the outlook. The Greenback found its support from domestic data, which were undoubtedly on the stronger side. US Retail Sales led the way with a surprising, positive result above expectations, and the data also suggests that real consumer spending bounced back over the quarter. Industrial Production was, however, relatively flat, but the NAHB housing market index continued to trend higher. Overall, some of the components of GDP strengthened considerably overnight and saw upward revisions of annual GDP estimates.

Within this context, the case for interest rate reductions by the Fed has been undermined, but Fed Chair Powell nevertheless kept the door open for further rate cuts. Speaking in Paris, Fed Chair Powell reiterated his message from last week and commented that the Fed is carefully monitoring the downside risks to US growth, and will act appropriately to sustain expansion.

Expected Ranges

USD/CAD: 1.3093 - 1.3051 ▼

EUR/CAD: 1.4635 - 1.4678 ▼

GBP/CAD: 1.6178 - 1.6244 ▼

AUD/CAD: 0.9142 - 0.9187 ▼

NZD/CAD: 0.8761 - 0.8795 ▲

EUR/USD: 1.1199 - 1.1222 ▲