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CAD Pressured Following Soft CPI, G10 FX Markets Subdued Overall

FOREX
  • A very brief hawkish reaction to Fed Governor Waller stating that several more positive CPI readings will be required to cut rates. However, with other elements of his speech in line and a more balanced Q&A, the greenback swiftly pared this initial advance, leaving the USD index close to unchanged in an overall subdued session for G10 currencies.
  • The one bit of excitement was in Canada, where a softer CPI report has prompted rate cut speculation for June to build. USDCAD is 0.20% higher on the session at 1.3650 with an overall bullish trend condition remaining intact here despite the most recent pullback.
  • We also noted that EURCAD has recently broken above a cluster of highs from the past six months around 1.4780 and hovers close to the most recent highs of 1.4822. Exponential moving averages are also in a bull mode position.
  • Elsewhere, NZD also underperforms ahead of tomorrow’s RBNZ decision, where the central bank will also release updated staff forecasts and hold a press conference. It is unanimously expected to leave rates at 5.5% as it is yet to be confident that inflation will sustainably return to target.
  • NZDUSD did also weaken on Monday following a Q2 RBNZ survey of inflation expectations showed households saw a slightly lower median expected inflation rate for the next two years. This may have prompted some profit taking, given the solid run of form for NZD which has been supported by the optimistic risk backdrop.
  • The Norwegian Krone crept higher in early trade amid the quieter markets on Tuesday. USD/NOK has so far respected support at 10.6478/10.6537, and a recovery in Brent crude prices could pose downside risks for the pair.
  • As well as the RBNZ, Wednesday’s calendar is highlighted by UK inflation data and the FOMC minutes of the May meeting.
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