FX Daily Strategy: Asia, Jul 15
Reduced energy risk may see more attention on trade for Bank of Canada
U.S. June PPI Should See Some fading from recent strength
USD/JPY Above 162.00 return focus to 162.70/84 highs
The Bank of Canada meets on July 15 and looks set to leave rates unchanged at 2.25%. The meeting will take place with inflationary risks coming from the Middle East having faded somewhat and escalation of trade tensions with the US a significant risk. This could lead to a dovish lean to the statement. Updates to economic forecasts are also due with the quarterly Monetary Policy Report. The Bank of Canada last met on June 10, but last updated its economic forecasts on April 29 when the last Monetary Policy Report was released. Since the last MPR Q1 GDP came in well below the BoC’s 1.5% annualized projection, at -0.1%, but early signals for Q2 are positive, with April GDP up by 0.5% on the month and May seen up by 0.1% in a preliminary estimate. This suggests Q2 will be stronger than a similar 1.5% BoC estimate made in April. 2026 GDP may still be revised a little lower, but that could be offset by an upward revision to 2027.
We expect an unchanged June PPI, a significant slowing from two straight gains of 1.1% as energy corrects from recent strength and other inflationary stimuli from the conflict in the Middle East fade. We expect a 0.4% rise ex food and energy, matching May’s outcome, and also a 0.4% increase ex food, energy and trade. The latter would be a significant slowing from May’s 0.8%. We expect a substantial 7.0% fall in energy prices, led by gasoline, though still only a partial reversal of May’s 10.7% increase, which followed gains of 7.5% in April and 10.4% in March. We expect food to remain quite firm with a rise of 0.5%, similar to a 0.6% increase seen in May.
On the chart, the bounce from the 161.28 Friday's low to regain the 162.00 level keep pressure on the upside and sets up scope for retest of the 162.70 and 162.84 highs. However, mixed daily studies suggest consolidation below here seen for now though bullish structure keeps suggest potential for break going forward. Clearance will extend the underlying bull trend and see room to the 163.00/164.00 congestion and high of December 1986. Meanwhile, support at the 161.28 and 160.48 lows now underpin. Would take break to fade the upside pressure and see deeper pullback to retrace strong gains from the May low.