US Import prices Improve, Oil claws some back losses

<h3>USDCAD, H1</h3>
<p>US import prices bounced 1.0% in May, with export prices edging up 0.5%. These follow respective declines of -2.6% and -3.3%. On a 12-month basis, import prices were down -6.0% y/y versus -6.8% y/y, and export prices were -6.0% y/y versus -6.8% y/y (was -7.0% y/y). As for imports, petroleum prices climbed 20.5% (a record advance) after diving -31.0% (was -33.0%) in April. Ex-petroleum, import prices rose 0.1% from -0.4% (was -0.5%). Food prices jumped 2.2% after dropping -1.6% (was -1.3%). And industrial supplies prices climbed back with a 4.6% gain from -12.3%. Import prices with Canada surged 3.6% after April’s -9.6% (was -10.2%) drop, and were unchanged with China versus a 0.1% prior gain. Export prices excluded agriculture increased 0.6% from -3.3%, as agricultural prices slipped -0.5% from -3.1%.</p>
<p>Canada’s capacity use rate fell to 79.8% in Q1 from 81.4% in Q4 (revised from 81.2%). The decline in the capacity use rate was driven by the business shutdowns that were in turn due to the lockdowns that began in March. A pull-back in manufacturing capacity use to 74.4% from 78.5% led the declines in total capacity use. Notably, the capacity use rate in the mining, quarrying and oil and gas sector was unchanged at 77.8%, with oil and gas capacity slipping to 81.5% from 81.8% — a hefty decline in oil and gas capacity use is in store for Q2 however. Separately, the debt to income ratio rose to a fresh record 176.9% in Q1 from 175.6% in Q4, as credit growth continued to move higher while income growth lagged. We expect further growth in this ratio this year as incomes stagnate/contract amid the shuttering of the economy and slow recovery.</p>
<p><strong>USDCAD</strong> was little moved following the data, where US import prices were firmer, Canadian utilization slipped below expectations and Oil markets showed some recovery from yesterday’s significant sell-off. Today, the pair have moved down from the tweezer top at <span>1.3665</span> to the lower Bollinger band and 200-hr support at <span>1.3520</span>, then a move higher to breach the daily pivot at 1.3550 and move to 1.3570.</p>
<p><a href="https://analysis.hotforex.com/wp-content/uploads/2020/06/2020-06-12_16-31-03.png"><img class="alignnone size-medium wp-image-140833" src="https://analysis.hotforex.com/wp-content/uploads/2020/06/2020-06-12_16-31-03-300×218.png" alt="" width="300" height="218" srcset="/wp-content/uploads/2020/06/2020-06-12_16-31-03-300×218.png 300w, /wp-content/uploads/2020/06/2020-06-12_16-31-03-324×235.png 324w, /wp-content/uploads/2020/06/2020-06-12_16-31-03-696×506.png 696w, /wp-content/uploads/2020/06/2020-06-12_16-31-03-578×420.png 578w, /wp-content/uploads/2020/06/2020-06-12_16-31-03.png 737w" sizes="(max-width: 300px) 100vw, 300px" /></a></p>
<p><strong>USOil</strong> recovered some from its one-week low of <span>$34.49</span> seen Thursday, with losses driven by risk-off conditions, as fears of a second virus wave spiked, leaving recovery speed in doubt. The July contract has since recovered to <span>$36.75</span> highs, though remains well below Monday’s three-month high of <span>$40.44</span>. The WSJ (paywall) reported last weekend that US shale production has been on the rise lately, as existing wells are restarted in response to higher oil prices. The Baker-Hughes oil rig count report for the latest week will be reported this afternoon, perhaps halting the 12 consecutive weeks of well closures. We have seen operating rigs drop to a total of 206 in the US. For comparison, on January 3 of this year, there were 670 oil rigs operating in the US.</p>
<p><a href="https://analysis.hotforex.com/wp-content/uploads/2020/06/2020-06-12_16-34-01.png"><img class="alignnone size-medium wp-image-140843" src="https://analysis.hotforex.com/wp-content/uploads/2020/06/2020-06-12_16-34-01-300×217.png" alt="" width="300" height="217" srcset="/wp-content/uploads/2020/06/2020-06-12_16-34-01-300×217.png 300w, /wp-content/uploads/2020/06/2020-06-12_16-34-01-324×235.png 324w, /wp-content/uploads/2020/06/2020-06-12_16-34-01-696×503.png 696w, /wp-content/uploads/2020/06/2020-06-12_16-34-01-581×420.png 581w, /wp-content/uploads/2020/06/2020-06-12_16-34-01.png 742w" sizes="(max-width: 300px) 100vw, 300px" /></a></p>
<p>US Equity markets have opened positively, with the <strong>USA500</strong> trading at <span>3,080</span> up 2.5% from the the close yesterday at <span>3,002.</span></p>
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<p><strong>Stuart Cowell</strong></p>
<p><strong>Head Market Analyst</strong></p>
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