The Canadian dollar is underpinned by rising oil prices. West Texas Intermediate, (WTI) the North American benchmark price for crude, surged on Friday and managed to hang on to its gains overnight. WTI climbed to $63.50 U.S. from its Friday closing level of $63.27. The rally was fueled by news of renewed fighting in Libya which threatened to disrupt that country’s oil exports. Traders were already concerned about crude demand outpacing supply due to the production cuts by the Organization of the Petroleum Exporting Countries, U.S. sanctions on Iran and Venezuela oil and hopes that a US/China trade agreement will boost global growth.
The jump in oil prices helped the Canadian dollar shrug off selling pressures stemming from Friday’s U.S. and Canadian employment reports. U.S. non-farm payrolls data was better than expected with Americans adding 196,000 new jobs in March while keeping the unemployment rate unchanged at 3.8%. Conversely, the Canadian labour report was weaker than expected. Canada lost 7,200 jobs in March. The combination of weak Canadian data and strong US data drove the Canadian dollar lower. However, the oil price rally cushioned the blow.
The Canadian dollar traded sideways in a narrow range overnight as did the rest of the major G-10 currencies and opened in Toronto unchanged from Friday’s close. AUD/USD and NZD/USD opened similarly while the Japanese yen gained 0.26% compared to the U.S. dollar.
Japanese yen traders lifted the currency off its lows after dovish monetary policy comments from Bank of Japan Governor Kuroda. He downgraded some regional forecasts due to ongoing-China/US trade tensions and weak global growth.
FX markets are biding their time ahead of Wednesday’s data and the European Central Bank meeting. It gets going early. Australian Consumer Confidence data and a speech by Reserve Bank of Australia Deputy Governor Guy Debelle will set the tone in Asia. A rash of U.K. economic data including February Gross Domestic Product will compete with Brexit headlines which should lead to GBP/USD trading volatility.
The European Central Bank Monetary policy meeting and press conference may be a bit of a let-down. The ECB’s dovish tilt at the last meeting and news about the Long Term Targeted Repo’s (LTTR0) suggest that Wednesday’s meeting will not provide much trading fodder for markets.
Wednesday afternoon, the Fed releases the minutes from the March 20 meeting. Traders will be looking for clues as to the degree of dovishness on the Committee. The dot-plot forecast pared rate hikes to just one in 2019 and traders will try to ascertain how committed they are to that view.
Canadian Building Permits and Housing starts data are due today as are U.S. Factory orders.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
