CAD, USD, JPY flows: CAD soft after BoC cut. USD fails to gain from PMI
The CAD has weakened modestly after the widely expected BoC rate cut. US PMIs once again outperform, but JPY remains well bid.
The BoC cut rates as most expected, and as was 90% priced into the market, so the reaction has been modest, with USD/CAD gaining around 20 pips. The USD has gained a little support from the stronger than expected S&P services PMI for July, with the contrast with the weak European PMIs becoming more stark, but the market may not be prepared to take this at face value until or unless it is backed up by a similar ISM survey, which showed a much weaker reading than the S&P PMI in June. With the new home sales data coming in on the weak side, the USD has received very limited support, and the JPY continues to power ahead. However, CAD/JPY may have the most scope for short term losses, with yield spreads suggesting we could see a fall to 100 or below medium term.
