The Canadian dollar and Donald Trump are recovering. The U.S. President did a "drive-by" on Sunday, to wave to supporters. His doctors say his condition is improving and that he could be released from the hospital today. That news reversed a large part of Friday’s "risk-off" move. Asia and European equity indexes rose, safe-haven FX trades were unwound, and oil prices climbed.
Trump’s health, and uncertainty around the U.S. election, which is less than a month away, will ensure FX volatility remains elevated.
Democratic challenger Joe Biden has about an eight-percentage-point lead in the polls. In 2016, Hillary Clinton enjoyed a similar performance, and we know how that worked out.
Asia equity markets continue to be relatively quiet as China is still enjoying Golden Week holidays. Australia was closed as well.
EUR/USD is trading at $1.1764, which is the top of its 1.1717-1.1764 range overnight. The reversal in risk sentiment from Friday to today, powered the single currency higher.
Eurozone economic data supported the gains. German and Eurozone Services and Composite Purchasing Managers Index data was a touch better than expected.
However, soft French, Italian, and Spanish Services PMI, partially offset the news. Eurozone August Retail Sales jumped 4.4% m/m, thanks to pent-up demand. The Canadian dollar was undermined due to EUR/CAD demand.
GBP/USD rallied from $1.2902 to $1.2964 due to data and Brexit developments. U.K. August Services PMI was 56.1 compared to the forecast of 55. U.K. Prime Minister Boris Johnson and European Union Commission President Ursula von der Leyen noted progress was being made in the Brexit negotiations and agreed to extend the talks for another month.
USD/JPY rallied as safe-haven trades were unwound, and because of a small increase in U.S. Treasury yields. Bank of Japan Governor Haruhiko Kuroda told reporters that the domestic economy was in "severe condition," but picking up. It was a nothing comment and justifiably ignored.
AUD/USD jumped aboard the rally bus. Prices rose to $0.7190 from $0.7160 with traders looking ahead to Tuesday’s Reserve Bank of Australia monetary policy meeting. The market is undecided about a rate cut. Some analysts believe the RBA will leave rates unchanged because the government releases a new stimulus budget on the same day.
U.S. Institute for Supply Management services data is due today. The Canadian calendar is empty.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
