The Canadian dollar lost 0.18 percent versus the US dollar on Tuesday. The loonie had a lively session being up against the USD at one point threatening to break below 1.3120, but as trade optimism swept through the market with the news of a US trade delegation to visit China next week and political stability after the debt ceiling deal agreement there was no stopping the greenback.
Wholesale data disappointed yesterday and if more economic fundamentals show signs of deterioration it will put more pressure on the Bank of Canada (BoC) to join the Fed in switching from devilish rhetoric to dovish actions with a rate cut later this year.
The US dollar rose across the board against major pairs after the US made it official that trade representative Lighthizer will travel to China for another round of talks. The US currency appreciated after a new round of trade optimism swept through the market, with equities also rising on the news.
The IMF downgraded global growth today, but even in defeat the US dollar managed to snatch victory as the fund upgraded US growth to 2.6 percent. The Fed’s decision to lower interest rates, plays a big part as the market awaits the July 31 Federal Open Market Committee (FOMC) meeting.
Oil prices rose ahead of the release of weekly crude data on the back of the news that the US will be sending a team to reopen trade talks with China next week. The prolonged trade war between the US and China has been a major factor putting downward pressure on global growth. Energy demand has been forecasted lower by think-tanks if the two largest economies don’t reach an agreement on trade.
West Texas Intermediate and Brent rose more than 1 percent on Tuesday as White House Adviser Kudlow confirmed the delegation traveling to China.
Concerns about Middle East tensions had receded, awaiting US weekly crude inventory data. The rise of US production to the point the US is now a net exporter has reduced the impact of geopolitical supply disruptions.
Gold lost 0.64 percent on Tuesday as trade hopes rose with the new round of talks between the US and China. Middle Eastern concerns have eased, leaving only Brexit anxiety as the main reason for demand for gold as a safe haven.
The Fed is heavily anticipated to lower the benchmark interest rate by 25 basis points on July 31, but over performing data has put a big question mark on how deep the central bank will be willing to slash rates. Lower rates around the globe as major central banks are once again singing a dovish tune, are easing the pressure on gold, but for the moment as trade hopes rise and Middle East tensions soften the yellow metal is trading lower.
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