The Canadian dollar is drifting lower in early Toronto trading, after stagnating overnight. The catalyst for this morning's selling pressure is just broad U.S. dollar demand, stemming from weak U.K. and European economic data releases.
The Canadian dollar is not alone. AUD/USD and NZD/USD are inching lower alongside the Loonie, as the positive sentiment from China and the US signing the Phase 1 Trade Agreement fades. Analysts are suggesting that the benefits from the deal are degraded because both sides are keeping existing tariffs in place. China Q4 Grpss Domestic Product rose 6.0% y/y in December, which was as forecast. It is the lowest growth in 30 years. However, the easing of trade tensions suggests there is upside potential in 2020. China Retail Sales rose 8.0%/y/y while Industrial Production was 6.9% y/y. Both results were better than expected.
AUD/USD is further undermined by expectations that the Reserve Bank of Australia will cut interest rates at least two more time in the coming year. NZD/USD outperformed the Aussie dollar but still drifted lower.
USD/JPY seems to have lost upside momentum after breaking above 110.00 this week. Prices peaked at 110.28 in Asia but are down to 110.12 in Toronto today, which may be because of profit-taking ahead of the US long weekend holiday.
GBP/USD inched higher overnight rising from $1.3053 to $1.3118 in Asia and into early European trading. Prices collapsed to $1.3028 when weaker-than-expected U.K. retail sales data results were posted. Retail Sales fell 0.6% and Core-retail sales fell 0.8% m/m in December. Both items were supposed to rise 0.7% and 0.5%, respectively. The disappointing news convinced many traders that the Bank of England (BoE) would cut interest rates at the January 30 meeting. The data followed dovish comments from BoE Governor Mark Carney and other Monetary Policy Committee members this week.
EUR/USD lagged the Sterling price action. Prices consolidated yesterday’s losses in a $1.1130-1.1141 range until eurozone inflation, and Construction Output data was released. The construction report was mildly disappointing while December CPI at 0.4% m/m was as expected.
Recent tepid Euro area data compared to upbeat US economic results drove EUR/USD below minor uptrend support and turned the intraday technicals bearish.
The U.S. dollar lost ground since its open in Toronto on Monday. The U.S. long weekend holiday (for Martin Luther King Day) and expectations for positive U.S. economic reports suggest the US dollar will grind higher today. However, the jury is still out as to whether the U.S. gains will be enough to drive USD/CAD above resistance in the $1.3060-90 area.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
