The Canadian dollar is trapped inside a USD/CAD $1.3040-1.3260 range and has been, since October 11. There isn’t any relief in sight. The Bank of Canada left monetary policy unchanged at the October 30 meeting, and there hasn’t been any new data or geopolitical developments since then, to alter their economic outlook. That has left Canadian dollar direction at the mercy of global U.S. dollar sentiment. Unfortunately, there is not any consensus around U.S. dollar direction, either.
The primary issue hampering FX traders is the U.S. and China trade negotiations. The trade war fueled a slew of global growth downgrades from institutions like the International Monetary Fund, the World Trade Organization, and the World Bank. They weren’t alone. All the leaders of the G-10 Central Banks said that "global growth concerns from the US/China trade war created downside risks to their domestic economic outlooks."
Global market participants were excited about a near-term resolution to the trade spat at the beginning of the month. That was thanks to chatter about a "Phase 1" agreement, and speculation that President Trump and Chinese President Xi Jinping would meet in November to sign a deal. The excitement has faded. CNBC reported Chinese officials were concerned about Trump’s failure to agree on tariff rollbacks. They thought rollbacks were part of the Phase 1 deal. The network also said that Chinese officials are discussing waiting for the results of the U.S. election or the Trump impeachment hearings. Trade deal rumours and speculation are rampant, but facts are in short supply. FX markets will continue to react to trade headlines (good or bad), and that uncertainty limits currency movement.
AUD/USD traded choppily in a $0.6787-0.6822 range overnight. The Reserve Bank of Australia minutes from the November 5 meeting were a tad more dovish than some players expected. AUD/USD dropped from $0.6805 to the overnight low when the minutes revealed that officials actively discussed trimming rates in November, before opting to wait and see. The news was a tad stale, and prices quickly rebounded, supported by the lingering hope for positive news on the China/U.S. trade front.
NZD/USD traders got sideswiped by remarks from a Reserve Bank of New Zealand Assistant Governor warning that interest rates could go lower. The initial selloff was reversed as he was merely rehashing the earlier monetary policy statement.
GBP/USD traded with a bit of a negative bias ahead of tonight’s leader’s debate. GBP/USD dropped to $1.2928 from $1.2969. Across the English Channel, EUR/USD inched higher, underpinned by bullish technicals targeting additional gains toward $1.1160.
Canadian dollar traders are likely to ignore today’s speech by BoC Deputy Governor Carolyn Wilkins as she is not expected to discuss monetary policy. However, Governor Stephen Poloz will, on Thursday.
Today’s economic data is Canadian Manufacturing shipments. The U.S. data includes Building Permits and Housing Starts.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
