The Canadian dollar was struggling to make gains below the USD/CAD level of $1.3130 and managed to cap losses at the USD/CAD level of 1.3230. FX markets were generally subdued overnight. The U.S. dollar was modestly softer against the major G-10 currencies when Toronto started trading this morning.
EUR/USD came to life after the European Central Bank (ECB) restarted its quantitative easing program, saying it would make asset purchases of EUR20 billion per month beginning November 1.
At the same time, the deposit rate was trimmed by 10 basis points to -0.50%.
EUR/USD spiked to $1.1070 from $1.1025 as the statement was released then quickly plunged to $1.0964.
Elsewhere, GBP/USD traded erratically in a $1.2311-$1.2334 range. Prime Minister Boris Johnson’s government released its "no-deal" Brexit contingency plan yesterday. So-called "Operation Yellowhammer" outlined a series of "worst-case scenarios in the even the U.K. leaves the E.U. on October 31 without a deal.
Traders yawned as those scenarios are why GBP/USD is trading so low.
Icy U.S./China trade tensions thawed further last night. President Trump tweeted "At the request of the Vice Premier of China, Liu He, and due to the fact that the People’s Republic of China will be celebrating their 70th Anniversary.... on October 1, we have agreed, as a gesture of good will, to move the increased Tariffs on 250 Billion Dollars worth of goods (25% to 30%), from October 1 to October 15."
Financial markets responded positively. AUD/USD and NZD/USD rose as did Asia equity indices and they managed to hang on to those gains in early Toronto trading.
USDJPY jumped to 108.16 from 107.15 following Trump’s tweet. The move was quickly reversed after today’s ECB announcement which drove US 10-Treasury yields down 2.77% to 1.685%
President Trump’s tweet boosted AUDUSD to 0.6886 from 0.6860. Analysts suggest that if prices sustain gains above 0.6860, AUDUSD will climb further to test 0.6970. NZDUSD was unable to break above resistance at 0.6450 and drifted lower.
The September West Texas Intermediate oil price rally ended yesterday with the drop below $57.10 U.S./barrel. The U.S. Energy Information Administration (EIA) reported US crude stocks fell by 6.91 million barrels in the week ending September 6. Traders didn’t care. They were more concerned about reports that the Organization of the Petroleum Exporting Countries would not increase production cuts to support prices.
Overnight, the International Energy Association warned that managing the 2020 crude oil supply would be “daunting.” WTI prices dropped to $54.75 in Toronto.
U.S. inflation and the weekly Jobless claims data are due this morning. However, the results will have limited impact due to the ECB press conference.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
