Canadian dollar rebounds from one-week low as oil climbs
TLT•Market drivers and trade uncertainty
- "The move was helped by firmer Canadian bond yields relative to U.S. Treasuries, but it still looks more like a modest correction than the start of a sustained rally," said Tony Valente, senior FX dealer at AscendantFX.
- "The loonie remains largely at the mercy of U.S. dollar sentiment, oil prices, relative rate expectations and ongoing trade uncertainty with the U.S., so unless those drivers shift more decisively, gains are likely to stay limited," Valente said.
- Domestic data on Monday showed inflation cooling more than expected last month while the U.S. imposed 50% tariffs on a wide range of Canadian goods.
- The price of oil, one of Canada's major exports, rose to its highest level in almost six weeks on mounting concerns about disruptions to Middle Eastern supply routes because of escalating hostilities between the U.S. and Iran and threats to shipping by the Iran-backed Houthi militia in Yemen.
- U.S. crude oil futures CLc1 were trading 2.3% higher at $86.24 a barrel, while the U.S. dollar =USD dipped from a one-week high against a basket of major currencies as traders gauged the likelihood of Bank of Japan intervention in the yen.
Upcoming Canadian data and bond yields
- Canadian retail sales data for May, due on Thursday, could add to recent evidence of the economy rebounding in the second quarter. Economists expect an increase of 1%.
- Canadian government bond yields moved higher across the curve. The 10-year CA10YT=RR was up 2 basis points at 3.582%, after earlier touching its highest level since May 21 at 3.602%.
(Reporting by Fergal Smith; Editing by Mark Porter)
((fergal.smith@thomsonreuters.com; +1 647 480 7446))
