The Canadian dollar bounced erratically within the confines of a narrow range overnight. FX traders took their cue from rising equity markets but were unwilling to commit to a direction ahead of three Central Bank meetings this week.
The Bank of Japan (BoJ), and Bank of Canada (BoC), meetings are Wednesday followed by the European Central Bank (ECB) on Thursday.
The BoJ meeting is expected to be a "non-event" as no policy changes are anticipated.
The ECB meeting and press conference usually creates EUR/USD volatility. This meeting won’t be any different. They are not likely to announce any new policy measures but may provide improved clarity to guidance.
The Bank of Canada meeting will be interesting in that they will present a full set of global and domestic forecasts. The impact of the forecasts will be tainted as the BoC is most certainly to suggest that their outlook is rife with risks due to COVID-19. Canadian dollar price action may be short-lived following the meeting.
Asia FX markets started the week with a positive risk outlook. That was due to Asia equity index gains, led by a 2.2% rally in China’s Shanghai Shenzhen CSI 300 index. European stock markets followed suit and S&P 500 futures point to a strong open on Wall Street. This week marks the beginning of corporate earnings season, and investors are looking for upbeat outlooks.
Oil prices are consolidating ahead of Wednesday’s meeting of the Organization of the Petroleum Exporting Countries. The cartel is expected to announce the end of the 2.2 million barrel/day production cuts that have been in place since April. The global economic recovery is forecast to improved crude demand, although the resurgence of COVID-19 in the U.S. is still a concern.
EUR/USD chopped about in a narrow range. Prices were underpinned by a report that France is planning a new stimulus program in August. GBP/USD retreated from its overnight peak of $1.2665, in part because of low expectations for the next round of E.U./U.K. trade talks, which start this week.
There isn’t any U.S. or Canadian economic data of note today, leaving Wall Street to provide direction for FX markets.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
