The Canadian dollar remains at the mercy of broad U.S. dollar sentiment. This week’s modest shift to a "risk-seeking" environment ended abruptly with the rebound in U.S. Non-manufacturing Purchasing Managers Index data, released yesterday. The October Non-manufacturing purchasing managers index was 54.7, easily beating the 53.5 that was predicted and much better than September’s 52.6 result. The news gave the U.S. dollar a "bid", and the greenback rallied and closed with solid gains across the board, against the G-10 major currencies.
The Canadian dollar was also under pressure, alongside the Australian and New Zealand dollars as the optimism surrounding the U.S./China trade talk progress started to fade. There is still a lot of talk that a "Phase 1" deal will be signed this month, which is reflected in current FX prices. However, there are reports that Chinese officials are concerned that they are ceding too many concessions and that it is time for the Americans to step up. Apparently, Beijing wants President Trump to commit to removing all tariffs before they will sign Phase 1. Trump has been quiet.
Oil prices continue to be supported by the improved tone around the trade talks. Saudi Arabia is said to want the Organization of the Petroleum Exporting Countries to consider deeper price cuts or to get improved compliance to existing production quotas. That news has not translated into any fresh support to the Canadian dollar.
In Europe, a series of mixed to positive Eurozone economic reports managed to lift EURUSD from an Asia low of 110.68 to 110.92 where it opened in Toronto. Better than expected German Factory orders, October Services and Composite PMI data, along with Eurozone PMI reports, gave the single currency some legs. However, the rally was not strong enough to change the bearish technical picture, which still forecasts a retest of $1.0950.
GBPUSD is directionless inside a $1.2800-$1.2970 trading range due to the ongoing UK elections and the Brexit delay. A new Brexit countdown will start after the December 12 election results.
Asia FX trading was a tad subdued. A flurry of excitement around the release of the New Zealand employment report quickly dissipated as the results would not have any bearing on the Reserve Bank of New Zealand’s dovish outlook. AUD/USD continued to consolidate inside a $0.6870-$0.6930 band.
USD/JPY was underpinned by the surge in U.S. Treasury yields following yesterday’s Institute for Supply Management non-manufacturing data. The Bank of Japan monetary policy minutes didn’t help. They showed that BoJ officials considered another round of monetary stimulus at the September meeting.
Canada's Ivey PMI data will be the highlight for USD/CAD traders. Many economists turn their noses up at this report, but FX traders react to sharp deviations from the previous results. The U.S. calendar does not have any top tier data available.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
