Canadian FX traders returned to their desks after the Canada Day long weekend to find the Canadian dollar about 0.25% weaker than where they left it on Friday. It wasn’t the only major G-10 currency pair to suffer a loss. The rest of the majors suffered a similar fate led by the 1.15% drop in the Swiss franc.
The currency moves are despite the positive progress being made between the U.S. and China on the trade war front. President Trump and Chinese President Xi Jinping agreed to resume talks with both sides offering up some concessions. Trump delayed the imposition of new tariffs and appeared to have reversed his stance on Huawei Technologies. China said it would end ownership limits for foreign investors in the financial sector and open up its manufacturing and auto sectors.
The FX reaction to the U.S./China trade news was somewhat subdued on Monday, in part because Trump reopened his European Union trade feud. Once again, he threatened sanctions on $4.0 billion of E.U. imports because of E.U. subsidies to aircraft manufacturers and parts makers. EUR/USD slid from $1.1360 on Monday to $1.1276 in Asia on Tuesday before climbing to $1.1300 in early Toronto trading. Weaker than expected eurozone Producer Price Index data also weighed on the single currency.
GBP/USD touched $1.2735 on Friday following a wave of month-end portfolio re-balancing demand and then retreated steadily until finding a temporary floor at 1.2608 in London this morning, profit taking, a negative bias around the U.K. Conservative party leadership race and soft domestic data undermined the currency pair. U.K. Construction Purchasing Managers Index data was weaker than expected.
The long-awaited meeting of the Organization of the Petroleum Exporting Countries and Russia finished Monday with an agreement to extend production cuts for another nine months. West Texas Intermediate (WT) oil prices surged to $60.24 U.S./barrel after the news, but the rally was short-lived. Profit-taking and fears of slowing demand triggered a wave of selling that sent prices to $58.57/b in New York on Monday. Prices drifted higher and opened in Toronto today at $58.94/b.
Today, the Reserve Bank of Australia cut its overnight cash rate (OCR) to 1.0% from 1.25% as widely expected. AUD/USD dropped then climbed because the policy statement was a tad less dovish than traders were anticipating. The RBA was slightly more upbeat on the outlook for global growth describing it at "reasonable" while stating that domestic growth would be around trend.
USD?CAD followed broad US dollar moves. Prices touched $1.3058 on Friday due to month-end portfolio re-balancing sales and then quickly rebounded ahead of the weekend G-20. Better than expected U.S. Institute for Supply Management Manufacturing PMI data underpinned the greenback and undermined the Canadian dollar.
There aren’t any Canadian economic reports available today, and the U.S. data is second-tier.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
