The Canadian dollar may have walked under a ladder, or maybe a black cat crossed its path. Whatever the reason, and although the day is young, it looks like the currency is having a bit of bad luck on "Friday the 13th."
The Canadian and New Zealand dollars are the only major G-10 currencies to have started today's session with losses against the U.S. dollar, compared to Thursday’s closing level. New Zealand’s problem stems from having a very dovish central bank and renewed AUD/NZD demand. The Canadian dollar is suffering from a 6.0% drop in West Texas Intermediate (WTI) oil prices since Wednesday.
Oil prices fell because both the International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries (OPEC) warned of a supply imbalance in 2020. Oil production will outstrip demand as the ongoing China/US trade war weighs on global growth. Rising US crude production is more than offsetting OPEC production cuts. Prices fell even though the American Petroleum Institute (API) and the EIA reported declines in U.S. crude inventories for the week ending September 6.
FX traders are still digesting the impact of yesterday’s European Central Bank monetary policy meeting. The ECB acted a tad more dovish than expected. It cut the deposit rate by 10 basis points to -0.50% and announced a new round of quantitative easing. (TLTRO III) EUR/USD traders crushed the currency driving from $1.1070, when the statement was released, to $1.0930 during ECB President Mario Draghi’s press conference.
EUR/USD recouped all of its losses by the end of the day. It continued to rally and touched $1.1108 in early Toronto trading. That's because Draghi may have hinted that there may not be any more monetary policy stimulus. He said "The implementation of structural policies in euro area countries needs to be substantially stepped up to boost euro area productivity and growth potential, reduce structural unemployment and increase resilience."
President Trump took note of the ECB actions and tweeted "European Central Bank, acting quickly, Cuts Rates 10 Basis Points. They are trying, and succeeding, in depreciating the Euro against the VERY strong Dollar, hurting U.S. exports.... And the Fed sits, and sits, and sits. They get paid to borrow money, while we are paying interest!”
The President also boosted risk sentiment when he spoke about the possibility of an interim U.S./China trade agreement. He wasn’t overly excited but admitted that kind of deal was a possibility. Later on, there were reports that China instructed local companies to start buying
American farm products, including soybeans and pork.
Traders were looking ahead to this morning's U.S. Retail Sales and Michigan Consumer Sentiment Index for direction. There are not any Canadian economic reports today.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
