The good news is bad news for the Canadian dollar
Daily Currency Update
According to Statistics Canada, gross domestic product increased in July by 0.1%, beating estimates for a -0.1% drop. Robust Canadian economic activity would generally urge the Fed to further increase rates, however CAD fell in today’s session.The Canadian dollar also felt the pressure from the North American equity market, with the TSX 60 in Canada falling around 1% and the equity markets in the US falling heavily (S&P 500 -2.7% and Nasdaq 100 -3.25%). The S&P 500 fell to a 22-month low, reversing yesterday's rally. Interestingly, the US dollar failed to increase, despite the negative sentiment in the financial markets. The US dollar fell against the Pound and Euro.
However, the Canadian dollar could not beat the US dollar, and it was the worst G10 currency performer today; it fell 2.34%, 1.31%, and 0.63% versus the Pound, Euro, and US dollar, respectively, at the time of this writing.
The Canadian dollar's weakness versus the USD is also related to the US counterpart resuming its rally as risk-off sentiment returned to financial markets on concerns about US inflation.
Key Movers
Cleveland Fed President Loretta Mester said achieving price stability is the Fed's most important goal. When she was asked if a recession would change her mind about raising interest rates, she said, "We've got to get to price stability. So we're going to do what we have to do to get the price stability. So — no".The Bank of England rescued the bond market in the UK (UK's Gilt market). Today, the GBP has been firmly up since the early session in North America. It may have been helped by short-covering (the Pound is heavily shorted).
The EURUSD pair also increased following comments from ECB Governing Council member Gediminas Simkus, who said he would support a three-quarter-point interest rate increase in the next few months.
Commodity currencies such as the Canadian dollar, Australian dollar, and Kiwi dollar remain on the back foot amid increases in interest rates of treasury yields.
Expected Ranges
- EUR/CAD: 1.3219 - 1.3435 ▲
- GBP/CAD: 1.4735 - 1.5190 ▲
- AUD/CAD: 0.8847 - 0.8900 ▲
- USD/CAD: 1.3605 - 1.3755 ▼