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The Loonie was the star of the forex show during the U.S. trading session as surging crude oil on U.S. sanctions on Iran pulled the positively-correlated currency along with it.

  • Canadian building permits rebounded by 3.1% from earlier 2.8% slide, 2.0% consensus
  • U.S. EIA crude oil inventories down by 2.2M barrels vs. projected 0.2M drop
  • U.S. final wholesale inventories up by 0.3% vs. 0.6% forecast
  • U.S. headline producer prices post 0.1% uptick vs. 0.2% estimate, 0.3% previous
  • U.S. core PPI up by 0.2% as expected, 0.3% previous
  • FOMC member Bostic: Inflation likely to run past 2% target
  • RBNZ kept interest rates on hold at 1.75% as expected
  • RBNZ downgraded CPI forecast from 1.8% to 1.6% by June 2019
  • RBNZ: Expects to keep expansionary policy for a considerable period
  • RBNZ presser ongoing

Major Events/Reports:

Higher crude oil lifts sentiment

Risk appetite was pretty much supported since the earlier trading sessions and the rallies carried on throughout the New York hours. Precious metals, however, shed some of their safe-haven gains.

  • Gold is down to $1,312.60 per troy ounce
  • WTI crude oil is up to $71.23 per barrel
  • Brent crude oil is up to $77.37 per barrel

The pickup in crude oil on a larger than expected draw in EIA stockpiles also lifted energy shares on Wall Street. Expectations of oil industry troubles in Iran after the U.S. doles out its sanctions also contributed to the rise.

  • Dow 30 index is up 182.33 points to 24,542.54 (+0.75%)
  • S&P 500 index is up 25.87 points to 2,697.79 (+0.97%)
  • Nasdaq is up 73.00 points to 7,339.91 (+1.00%)

Mixed U.S. data

You win some, you lose some! Uncle Sam’s economic figures came in a mix of red and green, with the headline PPI falling short of estimates and the core figure hitting the forecast.

Headline producer prices chalked up a meager 0.1% uptick for April versus expectations of a 0.2% gain and the earlier 0.3% increase. The core version of the report rose 0.2% as expected, slower than the previous 0.3% gain. Underlying data revealed that the drag stemmed mostly from the cost of services such as hotel accommodation and healthcare.

However, the scrilla seemed to shrug off these not-so-stellar readings as analysts pointed out that manufacturers could pay higher costs in the future, driven by the recent surge in crude oil.

RBNZ kept rates unchanged

As expected, the RBNZ kept interest rates on hold at 1.75% for the nth time, citing a weaker inflation outlook as one of the main reasons for maintaining their expansionary bias.

In particular, the central bank pointed to “recent low food and import price inflation, and subdued wage pressures” as factors weighing on price levels.

On the flip side, policymakers seemed more upbeat about the labor market, citing “an unprecedented increase in employment” as a plus for demand. However, it concluded:

“[W]e expect to keep the OCR at this expansionary level for a considerable period of time. This is the best contribution we can make, at this moment, to maximising sustainable employment and maintaining low and stable inflation.”

In its official Monetary Policy Statement, the RBNZ also trimmed back its OCR forecasts for June 2019 from 1.9% to 1.8%, suggesting a slower pace of tightening in the months ahead. It also downgraded its annual CPI forecast from 1.8% to 1.6% for the same month. Even so, it maintained its OCR forecasts for September 2018 and 2019.

Major Market Mover(s):

JPY

The yen was the weakest of the bunch as it returned its safe-haven gains and caved to U.S. dollar strength.

USD/JPY popped up from 109.57 to a high of 109.72, EUR/JPY rallied to a high of 130.48 before dropping, AUD/JPY is up to the 82.00 handle, and NZD/JPY rose to 76.76.

CAD

A combo of risk-taking and surging crude oil prices gave the Canadian dollar a strong boost as market watchers speculated that the U.S. sanctions on Iran could hurt its oil output.

To top it off, the stronger than expected rebound in Canadian building permits might have also contributed to the Loonie’s strength.

USD/CAD tumbled to a low of 1.2832, CAD/JPY surged to a high of 85.45, EUR/CAD slid to 1.5234, GBP/CAD fell to 1.7413, and AUD/CAD slumped below the .9600 mark.

Watch Out For:

  • RBNZ press conference still ongoing
  • 11:01 pm GMT: U.K. RICS house price balance (-1.0% expected)
  • 11:50 pm GMT: Japanese current account balance (1.62T JPY surplus expected)
  • 1:00 am GMT: Australia’s MI inflation expectations (3.6% previous)
  • 1:10 am GMT: RBNZ Governor Orr’s speech
  • 1:30 am GMT: Chinese CPI y/y (drop from 2.1% to 1.9% expected)
  • 1:30 am GMT: Chinese PPI y/y (gain from 3.1% to 3.4% expected)