The Canadian dollar went for a rollercoaster ride after yesterday’s New York open. On Monday, USD/CAD dropped to $1.2558 by mid-morning, then reversed course and climbed to $1.2589 by the end of the day. Prices continued to rise in Asia, reaching $1.2628 due to a bout of risk aversion from falling stock markets. Japan’s Nikkei 225 index lost 2.16%.
USD/CAD was also underpinned by fears that the decision by the Organization of the Petroleum Exporting Countries would negatively impact global growth due to sharply higher crude prices. The cartel and Russia decided not to raise production in November beyond the previously announced 400,000 barrels per day.
In Europe, equity traders took note of upward revisions to Services and Composite Purchasing Managers Index data and bought equities, which helped turn risk sentiment positive. The French CAC index climbed 0.94%, while the UK FTSE 100 is up 0.75%. Wall Street futures are clawing back yesterday’s losses, and S&P 500 futures point to a positive open.
Global markets are distracted by the ongoing U.S. budget and debt ceiling debate but are looking ahead to Friday’s US employment data.
The rebound in U.S. stock prices and rising crude oil prices weighed on USD/CAD, which dropped to $1.2585 in early Toronto trading.
EUR/USD is stuck in a narrow $1.1591-$1.1621 range, with prices garnering a modicum of support from the German and Eurozone Markit PMI reports, which were higher than expected.
GBPUSD is the best performing G-10 currency again, rising from 1.3586 to 1.3642. Markit Services PMI index was 55.4 compared to forecasts of 54.6. The Markit statement said, "the data indicated another strong recovery in UK service sector activity, but severe supply constraints contributed to escalating inflationary pressures." The comment about inflation pressures underpinned prices as it raised concerns the Bank of England may be forced to raise interest rates sooner than expected.
USD/JPY climbed to 111.31 from 110.88 due to rising U.S. Treasury yields and talk that Prime Minister Fumio Kishida planned to raise taxes.
AUD/USD traded choppily due to shifting risk sentiment and the Reserve Bank of Australia decision. The RBA left rates and monetary policy unchanged,
NZD/USD tracked AUD/USD moves. Traders are looking to Wednesday’s Reserve Bank of New Zealand monetary policy decision. A 0.25% increase in the Overnight Cash Rate (OCR) from 0.25% to 0.50% is expected and priced in. The risk is the forward guidance and whether another 0.25% hike will occur in November.
Today U.S. Institute for Supply Management services and Canada Trade reports are due.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
