The Canadian dollar is under pressure. USD/CAD closed at $1.3064 on Friday, and it is trading at $1.3164 in Toronto today. Once again, there were not any domestic events to precipitate the USD/CAD rally.
U.K. Brexit drama exploded on the weekend. U.K. and E.U. politicians are having a war of words over Brexit. GBP/USD is ground zero. The currency plunged from $1.3282 at the open in Asia on Monday and hit $1.3140 before closing at 1.3170 in New York. Chief Trade Negotiator David Frost told the E.U. that Britain was prepared to walk away without a deal. U.K. Guardian reported that Prime Minister Boris Johnson was preparing legislation to override the Brexit agreement on Northern Ireland. The E.U. accused the U.K. of backtracking on the withdrawal deal.
The currency pair plunged from a closing level of $1.3280 on Friday, to $1.3023, in Toronto today.
The GBP/USD drop spooked FX traders, and they bought US dollars against the rest of the majors. USD/JPY rallied the least. Prices are contained inside the 105.00-107.00 range that has been in play since the middle of August. Prices are supported by the widespread U.S. demand, although a whiff of risk aversion sentiment is slowing gains.
EUR/USD traded lower, albeit reluctantly. The single currency dropped from $1.1838 at the end of the day on Friday to $1.1779 today. Euro area Q2 GDP fell 11.8% q/q. The result was a tad better than forecast, but the result still underscores the damage that coronavirus-fighting measures did to the economy. The focus is on the European Central Bank meeting on Thursday. A dovish result is expected because of a combination of weak HICP inflation (0.2% ) and the Fed’s new average inflation targeting policy.
Oil and gold prices are lower, in part because of the resurgent U.S. dollar. Oil prices are also suffering from reports that China’s oil purchases will slow in the months ahead due to aggressive buying earlier.
The antipodean currencies traded lower. AUD/USD attempted to rally on Monday after better than expected China trade data, but could not sustain the move. Prices dropped from $0.7306 to $0.7241 today. NZD/USD lagged both AUD/USD gains and losses but is still down for the session.
There are not any Canadian or U.S. economic reports on tap today. Traders will take direction form GBP/USD moves and as usual, Wall Street price action. It could be ugly as NASDAQ futures were down 230 points as of 7:30 am ET.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
