- USD/CAD recovers an intraday high while remaining unchanged on a weekly basis.
- Softer U.S. inflation contrasted with positive Canadian building permits that previously favored Loonie bears.
- Market positions for more inflation guidance, softer WTI oil price on weak Chinese CPI/PPI prod USD/CAD.
USD/CAD pared the previous day’s losses within a weekly trading range around 1.3400 mid-morning Thursday, a mild bid as it retook an intraday high near 1.3385 at press time.
This means that the Loonie pair’s recent gains could be related to lower oil prices and the consolidation of inflation-led losses in the US dollar ahead of April’s US Producer Price Index (PPI). However, sellers of the pair remain bullish amid a dovish US Federal Reserve (Fed), especially after the previous day’s details on a weaker Consumer Price Index (CPI).
WTI crude is holding lower near $72.80 after falling from the previous day’s weekly high. Black gold thus vindicates softer inflation data from China and the US amid mixed sentiment and price-negative oil inventories. It’s worth noting that WTI crude oil is Canada’s largest export, so any change in the price of crude oil can move USD/CAD pair.
Domestically, Canadian building permits jumped 11.3% month-on-month in March, versus market forecasts of -2.9%, and previous readings were revised down 5.5%. Wildfires recently forced Alberta to shut down oil refineries before resuming operations on Wednesday, which could allow the Canadian dollar (CAD) to remain firmer despite the USD’s recent rally.
Speaking of data, China’s main Consumer Price Index (CPI) fell to 0.1% y-o-y from 0.7% earlier, versus an expected 0.3%, while the Producer Price Index (PPI) fell to -3.6% y-o-y compared to -3.2% market consensus and -2.5% previous readings. On the other hand, the US Consumer Price Index (CPI) eased to 4.9% year-on-year in April against market expectations to overprint the 5.0% inflation mark, the first print below 5.0% in two years. However, the MoM data was in line with optimistic forecasts of 0.4%, compared with 0.1% in the previous data. Further, CPI ex Food & Energy, known as core CPI, matched 5.5% and 0.4% of the market consensus on an annual and monthly basis, up from 5.6% and 0.4% previously, respectively.
Amid these struggles, S&P 500 futures posted modest gains and U.S. Treasury yields extended the previous day’s weaker performance, which in turn weighed on US dollar index (DXY).
Looking ahead, a light calendar in Canada and a cautious mood ahead of the key quarterly monetary policy report from the Bank of England (BoE) join mixed feelings on the US debt ceiling and banking implications to highlight US PPI as an important catalyst to watch USD / CAD pair of traders.
A three-month-old ascending support line, near 1.3360 as of press time, is preventing USD/CAD buyers.