USD/CAD took a dive early in North American trading but has bounced right back. That goes with a similar move in oil and stocks. For crude, the weekly US inventory data is due at the bottom of the hour and that could producer more volatility.
Yesterday, Canadian CPI was hot and that also briefly led to a drop in USD/CAD that was later erased.
It all speaks to a market that's off balance at the moment as fears about inflation mix with fears about a recession. Today US retailer Target lowered Q2 guidance and said March/April sales were soft but it also maintained its full-year guidance and the company is also running on lean inventories. Yesterday though, Home Depot revenues were soft.
I spoke with Reuters yesterday about the loonie and this is what they took away:
"The Canadian data has proved resilient all year long and so has the Canadian dollar," said Adam Button, chief currency analyst at ForexLive. "There was a feeling that Canadian inflation was on autopilot towards tolerable levels but maybe that's not the case."
Canada's consumer price index rose 4.4% year-over-year in April after a 4.3% increase in March, marking the first increase in 10 months. Analysts had expected inflation to cool to 4.1%.
"With inflation staying stubbornly high and signs of reacceleration in Canadian housing, the Bank of Canada won't be able to cut rates this year," Button said.
That's a good summation of where we stand but there's also the risk that a hard landing hits in H2 and there's a big rethink.
I don't see how anyone can have a great deal of conviction in the next 8 months in markets so these kids of back-and-forth moves are going to be more and more common.