The Canadian dollar soared, sank, then rose again in a lively overnight FX session. The currency tracked crude oil price action as well as the antipodean currency price movements. Traders ignored yesterday’s disappointing Canadian inflation report.
Canada's March Consumer Price Index fell 0.6%, mainly due to the steep slide in oil prices. Even worse, Statistics Canada said that most of the data were collected before the lockdowns got into full-swing, suggesting an even uglier result next month.
The data was not much of a factor for traders. Oil price movements had their attention.
The Energy Information Administration (EIA) reported that U.S. crude inventories climbed by 15.02 million barrels in the week ending April 17. The news was ignored and overshadowed by President Trump’s threat aimed at Iran. He tweeted "I have instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea." West Texas Intermediate jumped 48% since yesterday morning, rising from $10.90/barrel to $16.11 in Asia. Prices are steady at $15.55 in early Toronto trading as traders expect additional support when the 10 million barrel/day Organization of the Petroleum Exporting Countries/Russia production cuts take effect on May 1.
Eurozone economic data and European Central Bank actions are weighing on EUR/USD. German and Eurozone April Manufacturing Purchasing Managers Index data was weaker than expected.
Germany’s PMI fell to 31.5 from 43.2 in March, and the Eurozone dropped to 33.6 from 44.5. The news wasn’t a surprise but served to underscore the damage to the economies from the measures taken to combat the coronavirus pandemic.
EUR/USD traded with a negative bias in a $1.0834-$1.0758 range.
U.K. Services and Manufacturing PMI data was extremely weak. Services PMI plunged to 12.3 from 34.5 while Manufacturing PMI dropped to 32.9 from 47.8. A Bank of England official warned that the economic contraction was worse than anything seen in several centuries.
USD/JPY traded quietly even after a government report said the economy was "worsening rapidly," and in an "extremely severe" situation. Traders were unperturbed as the Japanese economy was just experiencing the same pains as the rest of the G-10.
AUD/USD rallied when Australian trade data showed a surge in exports, mainly to China. Prices climbed to $0.6369 from $0.6284. The currency pair was also supported by an uptick in global risk sentiment after Wall Street closed with gains, yesterday. However, S&P futures are flat today with traders waiting for the US Jobless Claims report.
Jobless Claims are expected to increase by 4.2 million, which risks another bout of risk aversion trading. On the other hand, the results shouldn’t surprise anyone, suggesting that a negative reaction will be short-lived. Canadian dollar price action will be driven by U.S. dollar sentiment.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
