The Canadian dollar was feeling rather perky yesterday morning. It was happily probing upside resistance supported by somewhat bullish Canadian dollar technicals. Then U.S. President Trump tweeted his dissatisfaction with production cuts by the Organization of the Petroleum Exporting Countries, and the Canadian dollar plunged.
Trump wrote: Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike - fragile! That was enough to send West Texas Intermediate WTI) plunging over 3.4% and that drop side-swiped the Canadian dollar. However, WTI prices recovered somewhat and climbed from an overnight low of $55.05/b to $55.73.
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The Canadian dollar continued to drift lower overnight and ignored the rebound in WTI. The currency was weighed down as U.S./China trade talk optimism faded slightly. China and the U.S. continue to negotiate, but markets are concerned that a lack of fresh details may mean the talks are not going that well.
Trump disagreed. Yesterday, he tweeted: China Trade Deal (and more) in advanced stages. Relationship between our two Countries is very strong. I have therefore agreed to delay U.S. tariff hikes. Let’s see what happens?”
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The American President is headed to Vietnam for another summit meeting with North Korea’s Kim Jong-Un. Last year markets were fretting about nuclear missile strikes. Today, those fears have faded, and traders do not seem very interested in the talks.
The U.S./North Korea talks may not be exciting to traders but Federal Reserve Chair Jerome Powell’s talk with Congress today is getting a lot of attention. Today is the first of two days when the Fed Chair updates the House and Senate about monetary policy. The Federal Open Market Committee issued a dovish policy statement on January 30, followed by FOMC minutes which were also dovish. The Fed pledged to be patient, and data dependent and that sentiment has been echoed by a series of Fed officials since the meeting. Today’s Congressional testimony is not expected to provide any fresh insight.
The Canadian dollar is also being pressured by GBPCAD demand. The British pound soared overnight rising from 1.3047 to 1.3236 on reports that UK Prime Minister would both support a delay to Brexit and a "no-deal" Brexit policy. The Labour Party is advocating another referendum which has also underpinned prices.
The Australian and New Zealand dollars saw their rally’s capped yesterday and prices trickled lower overnight.
The U.S. economic data this morning includes December Housing Starts, Building Permits, Red Book, and Case-Shiller Home Price Index. The Canadian calendar is empty.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
