The Canadian Dollar falls after CPI and retail sales miss
Friday 22 June, 2018
Daily Currency UpdateThe Loonie opens lower again this morning for the six consecutive days when measured against its US counterpart. As of writing the pair is currently trading at 1.3322, representing a decline of 0.06% on the day. While these are not large moves, we continue to see markets approaching the commodity-linked currency with caution ahead of the critical OPEC summit today in Vienna. OPEC was expected to add 1 million barrels a day to production but as settled on 600K per day and WTI trades at 67.81 per barrel at 9:22 am EST.
In what is set to be a busy Friday for the loonie, we have a raft of Macroeconomic data released. Headline Retail Sales figures missed expectations and posted a -1.2%, while Core CPI for May also missed expectations of 2.1% and was released at 1.9% Traders will be watching these reads closely with strong numbers likely to increase demand for the CAD ahead of the Bank of Canada’s next monetary policy meeting on July 11th.
From a technical perspective, resistance is seen for the USD/CAD at the 1.3333 with any downside moves in the pair support is seen at levels near 1.3289.
Key MoversA US Supreme Court ruling yesterday also weighed on the greenback - the decision gave states the power to force online retailers to collect sales tax in states where they do not have a physical presence. The Supreme Court decision also hurt the USD, and it weakened across the board – both EUR/USD and GBP/USD have made substantial gains over the last 12/24 hours. The decision also weighed heavy on stocks with the Dow falling by 0.8%.
The United States Dollar remains relatively unchanged in overnight trading with the DXY treading water at 94.85. With a slow economic calendar during the session and little economic related news in the headlines, the Greenback’s bullish movement has been stalled and range bound against most currencies.
The USD did have some movement against some of the cross rates with the EUR and GBP being the clear performers. Changing hands at 1.3243, the Sterling enjoyed a 160-pip rally on the back of a hawkish monetary policy statement. Across the channel, the EUR also faired markedly better than it had been, recording a 100-pip rise against the Dollar before settling at 1.1655.
The Euro crept higher through trade on Thursday pushing back above 1.16 and touching intraday highs at 1.1630. With little local data to drive direction the 19-nation combined unit took advantage of broader US weakness and softness across US factory orders. The US Philly Fed Factory print posted a sharper than anticipated depreciation in June, marking a considerable moderation from an upbeat print in May falling to 18-month lows. Investors then looked to book profits while the Euro found technical supports on moves toward intraday lows at 1.1510.
European flash services and manufacturing PMIs have been released overnight; the services element beat market expectations whereas the manufacturing printed weaker than forecasts. The mixed data hasn’t affected the single currency, and it looks set to finish the week above 1.16 vs. the dollar.
GBP/USD came under selling pressure yesterday morning ahead of the Bank of England monetary policy announcement. The dollar was generally better bid too, and GBP/USD came close to falling below the 1.3100 figure.
Come midday the central bank announced that it was keeping interest rates on hold at 0.5% – no surprise – but the MPC votes from the last meeting, released at the same time, were a surprise, showing that the bank’s chief economist Andy Haldane had joined two other committee members by voting for a rate hike. It gave the pound an immediate lift, and GBP/USD popped higher by 80 points.
Cable got a further lift later on in the day as the US Philly Fed Manufacturing Index printed weaker than expected at 19.9 vs. forecasts for 29.0, the lowest reading since November. A US Supreme Court ruling yesterday also weighed on the greenback - the decision gave states the power to force online retailers to collect sales tax in states where they do not have a physical presence. GBP/USD pushed on through and convincingly up through the high 1.32s. Bank of England Governor Carney and Chancellor Hammond spoke at Mansion House last night but said little to have an impact on currency markets.
The Australian Dollar maintained a relatively tight trading handle through Thursday struggling to break back above 0.74 U.S Cents yet finding support on moves approaching 0.7350. The AUD bounced between little-formed support and resistance for much of session with little macroeconomic data driving direction risk sentiment continued to drive broader corrections. While moves toward 0.7350 were seemingly well supported and the AUD bounced of intraday lows at 0.7346 upside gains were capped as the Aussie failed to mount significant upside pressure and followed equities lower.
Despite a pullback in U.S Treasury yields and a broader USD correction, the AUD remains vulnerable as long as tariffs and trade remain front and center. Long considered a proxy for more general risk appetite and Chinese sentiment the AUD is being weighed down by the heightened trade tension between the US and China with upside gains very much dependent on risk demand.
Attentions now turn to important US GDP number next week as the next big ticket macroeconomic driver with trade and political tensions continue to govern broader flows. Having broken comfortably through 0.7430 and 0.74 a close below those handles this week consolidates the downward correction and could see support form as resistance moving into H2 2018.
The New Zealand dollar opened yesterday morning sitting on 2018 support levels of 0.6860 heading into the latest release of GDP figures. A reading of 0.5% for the March Quarter matched expectations and produced the slowest annual reading in four years of 2.7%. Despite growth expanding by 0.5% for the quarter, it was not unexpected that a drop from the previous quarter of 0.6% would occur as the kiwi saw little movement after the result.
A sell-off in the afternoon trade saw fresh 2018 lows of 0.6825 and is now vulnerable to downside movement should it move through key support lines hovering between 0.6810-0.6830 back to December 2016. The Kiwi recovered after markets saw a reversal from the US Dollar from yearly highs following the release of weak Philly Fed manufacturing index figures overnight and the NZD/USD cross bouncing back to an intraday high of 0.6883.
As we head into the weekend, today we see the release of visitor arrivals with the New Zealand Dollar opening this morning at 0.6870.
- USD/CAD: 1.3289 - 1.3377 ▲
- CAD/EUR: 0.6417 - 0.6479 ▼
- CAD/GBP: 0.5629 - 0.5673 ▼
- CAD/AUD: 1.0070 - 1.0183 ▼
- CAD/NZD: 1.0840 - 1.0953 ▼