CAD Bulls in Charge, EUR Has its Best Month in One and a Half Years

June 28, 2019 (Western Union Business Solutions)  –  The greenback was subdued ahead of data that could cement an imminent reduction in U.S. interest rates. The euro, yen and the quarter’s best performer – the Canadian dollar – all ticked higher. Sterling also firmed while emerging markets softened, a reflection of a cautious mood ahead of tomorrow’s trade talks between the U.S. and Chinese presidents. Ahead of the Trump-Xi meeting Saturday at 11:30 a.m. local time (Friday 10:30 p.m. ET), all eyes will be on U.S. personal income and spending and the Fed’s main inflation yardstick. Both incomes and spending are expected to rise but underlying inflation is forecast to steady at a low 1.6%, below the Fed’s 2% goal. Tame inflation would allow cover for the Fed to cut rates as soon as its next meeting in late July. The dollar steadied above multimonth lows this week after Fed officials tempered expectations of bold rate cuts in the months ahead.

EUR

Up about 2% in June, EURUSD was on pace for its best month in nearly 1 ½ years against the greenback. The euro firmed thanks to data showing a bigger than expected rise in euro zone core inflation which moved to 1.2% from 1%. While higher, underlying inflation continued to run well below the ECB’s near 2% goal. The weak outlook for inflation and growth keeps pressure on the ECB to deliver stronger stimulus in the months ahead, policies that would put a headwind on the single currency.

CAD

Canada’s dollar extended its stellar run after better than expected data. Canada’s economy grew at a 0.3% rate in April, above forecasts of 0.1% from a 0.5% in March. The data added to evidence of Canada’s economy turning the corner after a recent slowdown. Canada’s resilient economy suggests a lower chance of the Bank of Canada cutting interest rates. By contrast, the market expects America’s central bank to cut rates next month. Canada’s dollar was poised to finish the month in first place with a 3% rise against the greenback.


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