Canadian dollar traders ignore this week’s collapse in oil prices. The currency rejected attempts to drive it below support, and it has been inching higher despite West Texas Intermediate oil prices trading below $58.70U.S./barrel in early Toronto trading.
FX markets were rangebound in a somewhat dull Asia session, and not willing to add to U.S. dollar losses incurred on Thursday. AUD/USD came under pressure after an Australian bank (Westpac) predicted that the Reserve Bank of Australia would cut rates three times in 2019.
Most analysts had recently changed their predictions from one to two rate cuts. However, the AUD/USD selling didn’t last, and buyers emerged to rally prices above Thursday’s Toronto closing level. The New Zealand dollar traded similarly to AUD/USD, and it is also trading well above its closing rate.
USD/JPY is trading with very little change from Thursday’s closing level. Risk aversion demand stemming from the on-going China/U.S. war of words (and tariffs) is keeping the pressure on the downside as are soft U.S. Treasury yields.
The European session was lively sparked by U.K. political developments. Prime Minister Theresa May announced she was resigning as of June 7 but would stay on in a "caretaker" role during the leadership convention which starts June 10. Sterling rallied, sank, rallied, and the dropped again following the news.
Traders are undecided if a new prime minister is positive or negative for sterling. The U.K. press suggests that Boris Johnson, the former Foreign Secretary, is the odds-on favourite to assume the Tory party helm. PM Boris is thought to be a GBP/USD negative because he is pro-Brexit. However, he has been accused of often flip-flopping on major issues, which means if he became anti-Brexit, GBP/USD could rally. GBP/USD traders ignored April Retail Sales data
EURUSD is consolidating recent gains inside a $1.1178-$1.1204 range. Traders are awaiting the results of the European Union elections which will be announced on Sunday.
U.S. President Trump appears to have improved the tone of his China comments. He is once-again predicting a quick end to the trade war and hinting that Huawei is merely a bargaining chip in the negotiations.
If the U.S. eases its attacks on Huawei, it may help improve the Canada/China relationship which has suffered ever since Canada arrested the Huawei CFO at the behest of the Americans. China was outraged and has incarcerated Canadians and cancelled imports of Canola and pork products.
The only data on tap this morning is U.S. Durable Goods. After that, American traders will be motivated to leave work early to get a head start on the long Memorial Day weekend festivities.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
