USD/CAD Rout As Oil Takes A Fresh Hit

Daily FX wrap: CAD rout as oil takes a fresh hit; 1.3200 taken out. EUR offered into 1.1000 despite German IFO; GBP brushes off weak business sentiment.

A quiet data schedule today, headlined by German IFO which saw a delayed upturn in the EUR, but the spot rate ran out of steam just ahead of 1.1000. USD strength looks set to stay going into the FOMC meeting, where policy is widely expected to stay unchanged but with potential signals towards a move in September.

This has had an impact on oil in particular, where WTI has slid into the lower $43.00s, dragging the related currencies lower in its wake. The Genscape report added weakness here, as Cushing inventory rose 1.14mln barrels.

USD/CAD resistance ahead of 1.3200 has been removed accordingly, and into the North American session, 1.3250 looks the next target level, if not 1.3300. Wall Street has followed lower on the open, dragging USD/JPY briefly under 106.00, but once again, central bank risk – the BoJ later in the week also – maintains a steady supply of dip buyers here.

In the UK, the CBI business optimism index painted a dark picture on sentiment post Brexit, but GBP losses were well contained as cable dips are well absorbed. We briefly took out 1.3100, and despite no major recovery, downside momentum is clearly lacking near term. EUR/GBP remains on a .8300 handle, with .8425 having capped well in recent sessions.

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