FXStreet (Guatemala) - Stephen Gallo, European Head of Currency Strategy at BMO Capital said that the big ‘surprise’ during the London morning and the Asian session was that ‘risk-off’ didn’t lurch ahead to new heights.

Key Quotes:

The JPY crosses didn’t move to new cyclical lows and equities in Europe & Asia only sold off modestly."

"EUR/USD and GBP/USD both trade indecisively: ‘risk-on/risk-off’, rate differentials and underlying macro themes are all individual drivers of these pairs which basically seem to be netting out against one another right now. The price of gold fell just over $8.00/ounce but the oil price was steady above $103.00/bbl."

"USD/CAD traded roughly between 1.0745 and 1.0770 during the Asian session and the London morning ahead of the key June CPI data due at 0830. The underlying bid tone in the oil price and fact that ‘risk-off’ hasn’t reached new heights yet have both probably been net supportive for the CAD. They probably explain why the pair generally gravitated lower over the course of the Asian session and the London morning."

"There are two additional factors FX investors will need to weigh around today’s June CPI data. The first is the outcome of the BoC’s rate decision on Wednesday: in theory, a stronger print today should not impact the CAD as much as it otherwise would have because the BoC is blatantly downplaying the recent rise in inflation."

"The 1.0700-1.0725 range should be the limit of CAD strength on a stronger print. At the same time, our economists’ call for a decline in the headline YoY figure to 2.2% (or less) should leave the door open to a 1.0800 test, given the dovish BoC tone on Wednesday."

"But the second set of additional factors includes the events in Ukraine and the Gaza Strip, which should impede USD/CAD positioning in either direction. As such, the case for momentum CAD buying or selling today seems rather weak, but if we had to take a stance now we would say the case for CAD weakness is stronger than the case for CAD strength."

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