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The Canadian dollar is going nowhere. It has been bouncing between 1.2720-1.2920 for the past two-weeks, and that is not likely to change in the next few days. "A lack of domestic economic data is clouding the short-term outlook...Sky-high oil prices have cushioned the Canadian dollar against broad-based US dollar demand." Said Rahim Madhavji, President of KnightsbridgeFX, a currency exchange company that helps Canadians get better exchange rates than the banks.
The Canadian dollar managed to squeeze out some gains following the release of the FOMC minutes from the May 2 meeting, yesterday afternoon. However, that move has been entirely reversed in overnight and early Toronto trading.
The Federal Open Market Committee (FOMC) minutes disappointed those looking for evidence of a "hawkish" bias to interest rate discussions. The Committee said that inflation could "overshoot' the 2% target, for a time" which doesn't suggest a faster pace of rate hikes. Trade policy concerns were clear. The statement noted that "a number of Districts, contacts, expressed concern about the possible adverse effects of tariffs and trade restrictions, including the potential for postponing or pulling back on capital spending."
The US dollar opened in New York with small losses in the commodity currency bloc compared to yesterday's close and modest gains in the rest of the G10 major currencies.
EURUSD traded sideways in Asia and popped in Europe, supported by comments by ECB Chief Economist Peter Praet. He said that the economic conditions are good but acknowledged there were 'clouds", one of which was Italy's new government's plan to loosen fiscal policy. EURUSD opened at 1.1728, in the top part of its 1.1691-1.1745 overnight range.
Better-than-expected UK April Retail Sales (Actual 1.6%, m/m vs forecast 0.7,m/m) gave Sterling a lift. GBPUSD popped to 1.3420 from 1.3350. The rally faded quickly, and prices opened in New York at 1.3392.
The Japanese yen rallied following the minutes, and USDJPY hit 109.34 in Asia. Lower Treasury yields fueled the move lower. Prices rebounded in Europe but faded again in early New York trading.
NZDUSD climbed when New Zealand reported a larger than expected Trade surplus for April. The trade surplus widened to $263 million, but a revision offset that good news to the March data which recorded a bigger deficit. NZDUSD traded in a 0.6905-0.6936 range and is trading in New York at 0.6918. AUDUSD tracked Kiwi moves and is trading in the middle of its 0.7544-73 range.
Today's US data is second-tier and unlikely to have much of an impact on FX trading.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians.
