The Canadian dollar is trading sideways within a well-defined range, not unlike the rest of the G-10 major currency pairs. Canadian dollar traders are content to sit on the sidelines to await the Bank of Canada policy meeting statement and Monetary Policy Report which is released on Wednesday. Governor Stephen Poloz’s press conference follows the data.
The FX major currency pairs are testing key support and resistance areas although with a lack of conviction due to the upcoming European Central Bank (ECB) policy meeting on Thursday. Traders are also content to await the release of top-tier U.S. economic data. September Durable Goods Orders (forecast -0.9% vs August 4.5%) are out on Thursday.
Q3 Gross Domestic Product (forecast 3.3% vs previous 4.2%) wraps up the week.
The Canadian dollar tracked broad U.S. dollar moves in overnight trading. Asia markets were awash in risk aversion sentiment, triggered by Monday’s Wall Street losses. The major Asian equity indices were sharply lower, led by a 2.66% decline in Japan’s Nikkei 225 index. European bourses took their lead from Asia, and they are posting large losses as well.
The ongoing U.S./China trade dispute continues to weigh on global sentiment. Neither party appears eager to make concessions or to reopen talks. The American’s upped the ante by sending two warships through the Gulf of Taiwan. China claims Taiwan as its territory, much to the displeasure of most of the Taiwanese.
Middle East geopolitical tensions are making markets nervous. Saudi Arabia’s explanation about the murder of a journalist inside their embassy in Turkey is not very believable. Turkey’s President is using the Saudi issue as a way of improving his stature with the West. President Trump doesn’t sound like he believes the Saudi story either.
Oil prices have been up and down with Saudi and Iran headlines. Today, prices revered yesterday’s rally. Saudi Arabia OIL Minister Khalid al-Falih said the Kingdom could boost production by one to two million barrels per day. The Iran oil minister said that it wouldn’t be enough to replace Iranian crude. The fall in oil prices has undermined the Canadian dollar.
It is a big week for American companies reporting quarterly earnings. Alphabet and Amazon report on Thursday while Verizon and some smaller U.S. financial names release earnings today. Better than expected earnings will help chase away risk aversion sentiment.
President Trump is talking about another 10% tax cut for the "middle class" after the November elections. If it happens, it will prop up the U.S. economy which will support the greenback and undermine the Canadian dollar.
There isn’t any domestic or U.S. data of note today leaving equity market price moves to dictate Canadian dollar direction.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
