The Canadian dollar wasn't paid any heed overnight. The rest of the G-10 major currencies didn’t fare much differently due to caution ahead of the U.S. Federal Open Market Committee (FOMC) meeting, and Bank of Canada meeting tomorrow. Nevertheless, a speech by Reserve Bank of Australia Governor Philip Lowe and ongoing Brexit issues provided traders with a bit of a distraction.
Lowe gave AUD/USD a boost when he suggested that domestic interest rates would not go into negative territory. He said "The Board is prepared to ease monetary policy further if needed. Having said that, it is extraordinarily unlikely that we will see negative interest rates in Australia. It is likely though that we will require an extended period of low interest rates to reach full employment and for inflation to be consistent with the target." AUDUSD climbed to $0.6858 from $0.6837.
U.S. President Trump gave risk sentiment a boost yesterday, when he said, "We are looking probably to be ahead of schedule to sign a very big portion of the China deal, and we’ll call it phase one but it’s a very big portion." His comments led to small gains in New Zealand and Canadian dollars and sparked a bit of unwinding of safe-haven trades. The Swiss franc and Japanese yen drifted lower.
Asia traders focused on British politics. U.K. Members of Parliament voted on Prime Minister Boris Johnson motion for an early election. To succeed, Johnson needed 430 votes (a two/thirds majority). He received only 299. GBP/USD dropped to 1.2808 from 1.2860. His fourth attempt may be the winner. This morning, opposition leader Jeremy Corbyn said Labour wouldn’t oppose the latest bill, which points to a December election.
USD/JPY continued to consolidate its October gains. Prices bounced inside a 108.84-109.06 range overnight, moving in concert with broad U.S. dollar sentiment and U.S. Treasury yields. A fall in U.S. one-year Treasury yields to 1.833% from 1.858% knocked USDJPY from the top, but the drop was tiny. Traders are awaiting the Bank of Japan monetary policy meeting on Thursday.
EUR/USD continued to see-saw in a narrow $1.1075-$1.1101 range. Traders turned bullish with the break above $1.1050 two weeks ago but the lack of sustained gains above 1.1160, tempered their enthusiasm. Broadly weak euro-zone economic data and the dovish European Central Bank monetary policy outlook are capping gains. Also, prices are weighed down by concerns that the FOMC may follow a rate cut with guidance suggesting that "mid-cycle" adjustments are finished.
Today’s U.S economic reports include Consumer Confidence, and Case-Shiller Home Price index. The Canadian calendar is empty.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
