The Canadian dollar retreated from yesterday’s peak, in part, because of a 4.8% drop in West Texas Intermediate (WTI) oil prices since yesterday. WTI topped out at $54.02 U.S./barrel on Tuesday and fell steadily until finding some support at $51.50 in Asia. Prices came under pressure on rising risks that the reported plans for the Organization of the Petroleum Exporting Countries and Russia to extend production cuts until year-end wouldn’t be enough to stem the demand slowdown from slowing global growth.
The American Petroleum Institute’s report that weekly crude stocks climbed 4.85 million barrels spurred a further drop in Asia, overnight. Canadian dollar sellers tracked oil price movements.
Asia FX markets ignored Chinese economic reports. China inflation and Producer Price Index data were mostly as expected. Instead, rising political tensions in Hong Kong and China’s reaction to the demonstrations sparked a bit of risk aversion sentiment, leading to Asian equity indices selling.
AUD/USD and NZD/USD traded with a negative bias because of the equity market weakness and softer commodity prices. Both those currencies are being weighed down by dovish central bank policies and a dip in commodity prices.
The Japanese yen is in the process of returning some of its overnight gains in early Toronto trading. The yen gained on the back of falling U.S. Treasury yields during the Asia session, but U.S. dollar weakness against the euro and pound sterling led to a modest retreat.
British pound traders have had a busy day. GBP/USD closed at $1.2723 yesterday, climbed to $1.2756 in early Toronto trading and then retreated to $1.2730 shortly afterwards. The rally was triggered after Boris Johnson, the front-running candidate to replace former Prime Minister Theresa May, said he wasn’t aiming for a "no-deal" Brexit but leaving that option on the table was a negotiating tool.
EUR/USD gave back European gains in Toronto trading. European Central Bank officials have warned of the necessity of new monetary policy easing if inflation remains low and the economic slowdown worsens.
The Canadian dollar ignored broad U.S. dollar moves and continued to consolidate Friday’s post-employment report gains. Traders are awaiting this morning US inflation and PPI data, although its impact may be limited. U.S. Consumer Price Index is forecast to rise 1.9% year over year, while Core CPI will rise 2.1%.
FX markets are biding their time until the G-20 summit in Osaka, Japan on June 28 and 29. U.S. Economic Director Larry Kudlow said that China/U.S. trade talks would resume after U.S. President Trump and Chinese President Xi Jinping meet at the G-20.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
