The commodity dollars pulled back versus the greenback on Tuesday, as the Australian dollar and New Zealand dollar both lost more than 1 percent.
The move was in line with the broad drop in commodities like oil and gold, but had more to do with a sell-off in carry trades as risk aversion remains high. Furthermore, as we discussed in yesterday’s Daily Fundamentals, Monday’s record surge in crude oil futures was due to the fact that it was expiry day and traders were simply covering their positions, and thus the decline on Tuesday was not totally unexpected. The Canadian dollar managed to hold its ground, slipping only 0.25 percent against the greenback, as Canadian CPI numbers reflected a pick up in inflation pressures. Indeed, headline CPI rose to an annualized pace of 3.5 percent, marking a nearly 5 year high, while the Bank of Canada’s core measure accelerated to 1.7 percent from 1.5 percent. Nevertheless, Credit Suisse overnight index swaps are still pricing in at least one rate cut by the BOC within the next 12 months. There is no data on hand for the comm bloc in the next 24 hours, but traders should watch out for the release of New Zealand Q2 GDP on Thursday.
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