Toronto markets will be quiet today. Remembrance Day is a Canadian bank holiday. However, market closures are not uniform. The Canadian bond market is closed, but not the Toronto Stock Exchange. Canadian banks may be closed, but their FX trading desks are partially staffed.
The week started with minor bout of risk aversion sentiment in Asia. Hong Kong protesters tossed firebombs at police who responded with tear gas and live ammunition. One demonstrator was wounded. Traders are concerned about mainland China’s response to the escalation of violence.
In addition, the optimism for an imminent U.S./China trade deal started to fade on Friday and continued in the early Asia session. Traders bought into the reports that China and the U.S. had agreed to rollback tariffs to facilitate singing a Phase 1 trade agreement. Chinese and American officials admitted as much. Unfortunately, President Trump was not part of the conversation. Friday he said about China "They'd like to have a rollback... not a complete rollback because they know I won't do it". The President sees tariffs as a powerful advantage, giving him leverage in the negotiations. He won't give it up easily.
Safe-haven demand for the Japanese yen was evident as USD/JPY was sold, falling from 109.24 to 108.92. Traders ignored the generally firm tone to U.S. Treasury yields, which saw 10-year Treasury yields bounce between 1.90% and 1.95%.
AUD/USD retreated with the negative sentiment while weaker than expected Electronic Retail Sales data exacerbated NZD/USD sales.
The British pound has been the liveliest currency today. GBP/USD rallied from $1.2787 to $1.2897, with the bulk of the move occurring during early Toronto trading. Brexit party leader Nigel Farage announced his party would not contest 317 ridings to thwart Liberal Democrats election hopes. GBP/USD was already underpinned by U.K. economic reports which, although weak, were better than those from August.
EURUSD inched higher alongside GBPUSD gains although it was confined to a $1.1017-$1.1037 range.
The Canadian dollar sank on Friday after the Labour Force Survey results were weaker than expected. The headline data showed Canada losing 1,800 jobs in October. However, if not for the Federal election, those losses would have been more significant. Economists were unhappy about the drop in hours worked and the lack of wage growth. USD/CAD surged on the news but was unable to crack major resistance in the $1.3240 area.
There are not any U.S. or Canadian data releases today. A Trump tweet on tariffs (if it happens) could have an outsized reaction in FX markets due the partial holidays in Canada and the U.S.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
