The Canadian dollar rallied again, overnight. It was not alone. The domestic currency rose alongside the rest of the major G-10 currencies, led by a 0.44% rise in the New Zealand dollar. The latest shift to positive risk sentiment was triggered when U.S. President Trump changed his mind (again) on a COVID-19 Relief bill. Thursday, he suggested being open to a more encompassing bill than his earlier tweet about a narrow-focused stimulus plan.
The Dow Jones Industrial Average closed with gains. Asia equity markets were mixed. Japan’s Nikkei 225 index closed moderately lower, while Australia’s ASX 200 finished unchanged. The big mover was the Shanghai Shenzhen 300 Index, which surged 2.04%. Pent-up demand lifted prices as markets had been closed for the past week because of Golden Week holidays.
European equity markets are higher, and U.S. equity futures suggest a solid open on Wall Street.
Global FX markets are fixated on the United States of America.
U.S. economic data and U.S. politics are the major drivers of FX direction, and the G-10 currencies appear to trade as one.
US equities are rising as traders anticipate stimulus. FX traders are taking their direction from equity markets, which are signaling "risk-on."
EUR/USD bounced around in the earlier part of this week following a series of dovish comments from European Central Bank President Christine Lagarde and other ECB officials. They were warning of the need for additional monetary easing, expressing concern about the level of the currency, and stating that the risks to their economic outlook were to the downside.
EUR/USD traders forgot those worries when Trump appeared to flip-flop on a coronavirus relief bill. EUR/USD is near the top of its $1.1705-$1.1808 range for the week. A decisive break above $1.1810 will shift the focus to $1.1900.
GBP/USD bounced in a $1.2845-$1.3005 range this week. Prices peaked on Tuesday, and then bounced between $1.2850 and $1.2970. Widespread U.S. dollar selling pressure supported prices which was offset by weak economic data. U.K. August Gross Domestic Product rose 2.1% m/m, missing the forecast for a 4.6% gain. Analysts are concerned that the latest outbreak of coronavirus in the U.K. will drive September GDP even lower. Industrial and Manufacturing Production were also weaker than predicted.
GBPUSD continues to be buffeted by conflicting Brexit headlines, which will be the case until there is a deal or no-deal, officially.
Canadian dollar traders are awaiting the September employment report. Canada was expected to add 157,000 jobs but U.S. influences will overshadow the results.
Canadian markets are closed Monday for Thanksgiving.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians.
