The Canadian dollar is riding the coat-tails of a broad U.S. dollar selloff against the major G-10 currencies. USD/CAD dropped from $1.2744 on Wednesday to $1.2608, despite West Texas Intermediate oil prices plunging 5.7% in the same period.
Canadian dollar traders are also ignoring the negative economic impact from existing coronavirus lockdown measures in Ontario and Quebec and the extremely low numbers (compared to the U.K. and U.S.) of people getting COVID-19 vaccines.
Canada Retail Sales data for December will underscore the economic damage to the economy from the pandemic. December Retail Sales are forecast to drop 2.6% m/m, Statistics Canada’s "flash" estimate. The data is stale, and the news is expected, which suggests Canadian dollar traders will ignore the results.
Elsewhere, the G-7 meets virtually today. Today’s meeting lacks all the drama of the meetings since 2017, which tended to be hijacked by a former reality TV host. According to the media, President Joe Biden will say America is returning to the Iran Nuclear treaty and the Paris Climate Accord.
EUR/USD accelerated to $1.2144 from $1.2083 due to economic data and an easing of interest rate increase fears. Yesterday’s weaker than expected U.S. jobless claims report coupled with Wednesday’s Federal Open Market Committee statement reaffirming their easy monetary policy stance overshadowed steady to firming U.S. Treasury yields. Traders determined that if the Fed was not going to be forced into prematurely raising U.S. rates, then it was time to jump back into "risk-on" trades. Eurozone and German data were slightly better than expected.
GBP/USD pushed above resistance at $1.4000 and are trading at $1.4017 in New York.
GBP/USD continues to benefit from the COVID-19 vaccine roll-out and better than expected Manufacturing Purchasing Managers Index data.
Traders are also hopeful ahead of Prime Minister Boris Johnson’s speech on Monday when he is expected to outline the removal of COVID-19 restrictions.
USD/JPY dropped from 105.74 to 105.25 as fears of higher U.S. interest rates faded with the weak jobless claims data. Comments by Fed officials about the need for accommodative monetary policy also helped.
AUD/USD shrugged off soft Retail Sales data and accelerated above a three year peak, climbing from $0.7760 to $0.7860. NZD/USD mirrored AUD/USD moves but to a lesser extent.
The U.S. economic data is second-tier leaving equity markets and Treasury yields to dictate FX direction.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
