The Canadian dollar hit something of a peak on Friday and is wafting downwards. Canada added 66,800 jobs in January, according to Statistics Canada. The Canadian dollar soared on the news and is struggling to hang on to them thanks to many external influences.
Chinese markets opened after being closed for a week of Chinese New Year celebrations. The grind higher in the U.S. dollar index during China’s absence from the markets led to USD/CNY being "fixed" much lower, which unsettled FX markets which were already uneasy because of Swiss franc gyrations. Traders are also concerned about the U.S./China trade talks which start this week in China. There is a sense that little progress is being made, in part because President Trump cancelled a meeting with Chinese President Xi Jinping.
The Swiss franc suffered from a "flash crash" in the very early minutes of markets opening in Asia. USD/CHF soared to 1.0099 from 0.9998 within minutes and then fell back to 0.9890. The reason for the move is unknown although traders speculate that it was because of an erroneous order entry in a market with extra-thin liquidity conditions due to a holiday in Japan.
Prices drifted higher during the European session, and the currency pair is trading at $1.0040 in New York. The steep rally, then plunge, followed by a rebound, spooked FX traders and contributed to broad, yet modest U.S. dollar gains since Friday’s close.
The Canadian dollar was also undermined by generally bullish U.S. dollar sentiment due to a series of concerns. Some of those concerns include the recent spate of weak euro-zone economic reports that have led to a dovish monetary bias by the European Central Bank. ECB President Mario Draghi is concerned that Brexit and the U.S./China trade talks are acting as a drag to euro-zone growth. His remarks were echoed today when ECB Vice President Luis de Gundos blamed low energy prices and trade uncertainty for the soft economic data.
"No-deal" Brexit fears continue to weigh on GBP/USD. The bearish sentiment helps support the U.S. dollar against the rest of the majors and weighs on the Canadian dollar as a result. GBP/USD was slammed this morning after U.K. Manufacturing and Industrial production data was weaker than expected.
Even worse, December economic growth declined. Gross Domestic Product fell 0.4% rather than 0.0% as was expected. Prime Minister Theresa May and the E.U. have been unable to come to terms around a workable Irish border plan and time is running out.
There isn’t any Canadian or American economic data of note available today, leaving traders to look ahead to Wednesday’s U.S. inflation and Retail Sales reports.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
