The Canadian dollar drifted lower yesterday and then consolidated the losses overnight. The loonie tracked the underperformance of the Antipodean currencies during the Asia session. NZD/USD got things going when it fell from $0.6406 to $0.6367 after a report showed that Q4 Inflation Expectations were 1.8%, q/q. The data was weak enough to convince traders that the Reserve Bank of New Zealand (RBNZ) will not only cut the Overnight Cash Rate (OCR) from 1.00% to 0.75% at Tuesday’s meeting but issue a dovish policy statement leaving the door open to further cuts.
Across the Tasmanian Sea, AUD/USD suffered as well, despite the Business Confidence data being close to forecasts. Traders are concerned that slow wage growth and a weakening labour market will lead to additional monetary policy easing. AUD/USD dropped to $0.6834 from $0.6857.
The lack of fresh insight into the state of the U.S./China trade talks is also weighing on the Antipodean currencies and the Canadian dollar. Last week’s euphoria about tariffs being rolled back vanished with President Trump’s comments. He said he had not agreed to any rollbacks which led to risk-seeking trades unwinding. AUD/USD and NZD/USD retreated while USD/CAD rallied.
Traders are looking ahead to Trump’s speech to the Economics Club of New York, scheduled for lunch-time today. The greenback has been in demand on speculation that the president will announce a delay in the levying of tariffs on European auto imports. They are also hoping for some insight into the China trade talks and news if and when a Phase 1 deal will be signed. Those sentiments led to broad-based (but shallow) U.S. dollar demand, which undermined the Canadian dollar in the process.
The British pound has enjoyed a lively 24 hours of trading. Yesterday, GBP/USD spiked to $1.2897 from $1.2806 when Brexit Party Leader Nigel Farage announced his party wouldn’t run any candidates in 317 ridings held by Conservatives. However, prices started to recede almost immediately and continued to drift lower from yesterday’s closing level of $1.2855 to $1.2817 just before Toronto opened. Disappointing U.K. employment data exacerbated the move.
EUR/USD ignored improved German investor sentiment. The ZEW Confidence Survey rebounded to -2.1 from -22.8 previously, but it wasn’t enough to lift the single currency EUR/USD dropped to $1.1012 from $1.1037 on the back of broad U.S. dollar sentiment.
The Canadian dollar is under pressure and ignored the rebound in West Texas Intermediate oil prices to around the $57.00 area. Trade deal hopes lifted oil prices while the loonie suffers from broad-based bullish U.S. dollar sentiment.
The Canadian and U.S. economic calendars do not have any top-tier data.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
