The Canadian dollar recovered most of yesterday’s losses and is trading in Toronto at the top of its overnight range. The renewed Canadian dollar demand was not triggered by any domestic news or economic reports, but by better than expected China trade data.
Traders jumped all over the news that China’s exports surged by 21.3% in March, well above the 16.6% decline seen in February. Traders concluded that the jump in exports was evidence of easing trade worries. Some analysts believe the February/March results may have been distorted by the Lunar New Year holidays. The data wasn’t all sunshine and unicorns, either. China imports dropped with imports from the U.S. down 28%.
The China trade data news turned FX risk sentiment to positive. NZD/USD recovered from earlier losses arising from weaker than expected NZ Business Purchasing Managers Index. AUD/USD tracked Kiwi gains, and the Canadian dollar was dragged higher as well.
The improved risk tone was evident in USD/JPY trading. A rise in U.S. 10-year Treasury yields to 2.526% underpinned demand. There are reports that the previously announced deal by Mitsubishi UFJ to buy the aviation loan book from Germany’s DZ bank was behind today’s EUR/JPY rally.
U.S. dollar selling pressure continued during the European session. EUR/USD climbed steadily and extended gains in early Toronto trading, supported by modestly better euro-zone Industrial Production data. However, EUR/USD gains may be limited after European Central Bank President Mario Draghi reconfirmed his dovish bias this week.
GBP/USD has climbed steadily since touching $1.3050 in Asia and is flirting with $1.3100 in early Toronto trading. U.K. Prime Minister Theresa May was able to convince the European Union to grant an article 50 extension until October 31. That news reduced the risk of a "no-deal" Brexit and therefore a steep loss in the currency.
The Canadian dollar traded higher alongside the broad U.S. dollar weakness and got an added lift from the rebound in West Texas Intermediate oil prices. WTI oil climbed to $64.57 U.S. in Toronto trading, recovering almost all of yesterday’s losses. Oil prices are supported by the China data suggesting a rebound in global growth combined with ongoing sanctions against Iran and Venezuela and the production cuts by the Organization of the Petroleum Exporting Countries.
The U.S. dollar is poised to finish the week with losses across the board against the major G-10 currencies, led by a 0.87% rally in EUR/USD, compared to last Friday’s close. The Japanese yen and Swiss Franc are marginally lower.
There aren’t any domestic economic reports leaving US Consumer Sentiment and Trade data to drive direction.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
