The Canadian dollar is on a roll. It is not the only currency that is doing well. All the G-10 majors are adding to their Friday gains following rumours and then confirmation that U.S. President Trump delayed raising tariffs on Chinese imports for two months. The tariff increase was slated for March 1, but as the China/U.S. trade talks progress, the delay was seen as evidence that the odds for a trade deal improved.
Canadian Retail Sales were dropped 0.1% in December which isn’t that stellar of a result considering the time of year. However, the 1.7% rise, year over year, helped to underpin the domestic currency on Friday.
The Canadian dollar got a bit of lift from President Trump’s tweets yesterday. He tweeted: "I am pleased to report that the U.S. has made substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues. As a result of these very productive talks, I will be delaying the U.S. increase in tariffs now scheduled for March 1. Assuming both sides make additional progress, we will be planning a Summit for President Xi and myself, at Mar-a-Lago (Florida), to conclude an agreement. A very good weekend for U.S. & China!"
Asian equity indices rallied on the news led by led by a 5.98% gain China’s Shanghai Shenzhen 300 index. The antipodean currencies rallied. AUD/USD rose from $0.7132 to $0.7179 and NZD/USD climbed from $0.6844 to $0.6899. The New Zealand dollar got an added lift from better than expected Retail Sales. (Actual 1.75%, q/q vs 0.3% previously)
USD/JPY’s rally on the improved risk sentiment was rather shallow. Soft U.S. Treasury yields hampered price gains. The 10-year Treasury yield is below 2.69%. The Nikkei rose 0.48%.
President Trump’s tariff tweet underpinned EUR/USD, but the single currency struggled to rally and traded in a narrow $1.1330-$1.1357 range. The euro-zone has its own problems. There is an election in Spain and right wing, anti-Euro, campaigning always makes traders nervous. The European Central Bank appears to have dialed up is dovish stance and traders are concerned that they will maintain their dovish bias for longer than was previously expected.
Sterling is in a world of its own, as usual. Prime Minister Theresa May delayed this week’s parliamentary vote on the Withdrawal Agreement from the European Union for about two weeks. There were plenty of press reports suggesting that the E.U.’s March 29 Brexit deadline will be extended as well, which as underpinned GBP/USD. Traders believe that the deadline extension reduces the odds of a "no-deal" Brexit.
There aren’t any Canadian economic data available today, suggesting oil price movements will govern the price action.
