Wrap Up
The Canadian dollar weakened to a near seven-week low against its U.S. counterpart as investors worried about rising trade tensions between the United States and China.
A yearlong U.S.-China trade war has boiled over as Washington accused Beijing of manipulating its currency after China let the yuan drop to its lowest point in more than a decade.
Chances of a Bank of Canada interest rate cut this year have climbed to more than 70% from about 40% after the release of data last week showing the economy strengthened more than expected in June, the overnight index swap market indicated.
Canadian government bond prices were higher across the yield curve, with the two-year bond up 22 Canadian cents to yield 1.346% and the 10-year bond rising 136 Canadian cents to yield 1.234%.
Levels and recommedations
A rush into the safety of U.S. government bonds smothered a
broad rally in global stocks today as spiraling fears of a global
economic recession gripped markets.
Gold touched a six-year high of $1,489.76 per ounce. The
Japanese yen rose 0.2% to 106.26 , although that was still some
way from levels seen on Monday when the trade war’s escalated.
China’s state banks have been active in the onshore yuan forwards
market, tightening dollar supply and supporting the Chinese
currency, sources told Reuters. Despite that support, the yuan still
dropped 0.2% to 7.0708 in offshore markets.
The Canadian dollar is trading weaker above 1.33 mark despite
better than expected domestic PMI numbers for the month of
June. The down move in CAD seems unaffected despite broader
selling in the US dollar index. The crude oil prices fell sharply
after crude oil inventories came in better which further
underpinned the demand for loonie. The USDCAD has an
immediate resistance of 1.3350 levels and is likely to trade in the
range of 1.3275-1.3350 for the day.