The Canadian dollar traded slightly firmer in a narrow range overnight. The currency support came from small losses in the U.S. dollar against the G-10 majors, which were partly due to pre-weekend profit-taking. The greenback is higher across the board compared to Monday's New York open, led by gains against the British pound. The Canadian and New Zealand dollars bucked the trend and posted small gains.
GBP/USD was the biggest mover overnight, falling from $1.2335 to $1.2272. Sellers emerged following remarks by Bank of England policymaker Michael Saunders. He warned that prolonged, high Brexit uncertainty could warrant looser monetary policy, especially if global growth continued to disappoint. His comments weren't new. However, in the environment, where the European Central Bank and the U.S. Fed have cut interest rates, they carried more weight. Traders ignored the part where he suggested rates could go higher if Brexit uncertainty improves and global growth resumes.
Also, Brexit concerns continue to weigh on the currency. Prime Minister Boris Johnson insists that Britain will leave the European Union on October 31. Anti-Brexit MPs are striving to thwart Johnson's efforts. Some EU officials describe the chances of an EU/U.K. deal by October 31 as "slim." EU President Jean-Claude Juncker said it is Britain's fault if a Brexit deal isn't reached.
EUR/USD started the week under selling pressure from weaker than expected data. That theme continued this morning. EUR/USD dropped to $1.0906 from $1.0925 following weaker than forecast Industrial Confidence, Business Climate and Economic Sentiment indicator data. Consumer Confidence was unchanged. However, profit-taking droves prices to 109.39 in early Toronto trading.
Global markets are looking ahead to the next round of U.S./China trade negotiations which are slated to begin October 10, in Washington. China pledged to buy additional US products ahead of the meeting in response to Trump waiving tariffs (temporarily) ahead of the talks.
The U.S. Dollar Index (DXY) appears to be losing upside momentum just above resistance in the 99.10-20 area. Prices are at levels last seen in May 2017. A break below 98.60 would suggest renewed U.S. dollar weakness, in the short term, which could support the Canadian dollar.
USD/JPY broke above its overnight high in early Toronto trading. The rally was fueled by rising US Treasury yields and in part, by pre-weekend profit-taking.
The Canadian dollar continues to be supported by lowered risks for domestic interest rate cuts as the Canadian economy continues to outperform Bank of Canada forecasts. West Texas Intermediate (WTI) oil prices add another layer of support to the currency while they remain above $50.00/barrel.
Today's U.S. data includes Michigan Consumer Confidence and Durable Goods Orders.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
