• Canadian Dollar  trades slightly higher supported by Oil price rises on supply fears. 

• Canadian Manufacturing PMI comes out lower than expected in June though the response from price action is limited. 

• Traders are in two minds about the outlook for monetary policy from the Bank of Canada as GDP continues to grow but inflation falls.  
   

Canadian Dollar rises versus the US Dollar on Tuesday during the US session on the back of higher Oil prices, Canada’s largest export, amidst fears of supply cuts by Saudi Arabia and Russia. 

The Canadian Manufacturing PMI data release, which came out a few hours ago, was lower than expected and continues to show contraction but has had a limited impact on the exchange rate. 

USD/CAD is trading in the lower 1.32s on Tuesday during the US session.  

Canadian Dollar news and market movers 

• The Canadian Dollar is trading up by about 0.25% due to rising Oil prices. Whilst a muted outlook for global growth had weighed on Oil prices, fears of supply cuts by Saudi Arabia and Russia outweighed them. 

• The Bank of Canada (BoC) hiked rates by 0.25%, raising its Policy Interest Rate to 4.75% at its last meeting after a five-month pause. In its statement, the BoC gave increased consumer spending and higher-than-expected economic growth as the primary causes.

• Canadian GDP in May rose by 0.4% after the economy flatlined in April, increasing expectations of more BoC rate hikes. 

• Core Inflation in May, however, fell to a lower-than-expected 3.7% versus the 3.9% forecast and 4.1% previous, reducing expectations the BoC will hike interest rates at its July 12 meeting. 

• The BoC’s inflation target is between 1-3%, so with Core inflation at 3.7%, it is not now as far off the upper threshold as previously. 

• The S&P Global Manufacturing PMI survey for June came out at 48.8, which was below the 49.6 forecast and the 49 previously. Despite the lower result, USD/CAD was little affected.

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