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The Canadian dollar plunged on Friday. Weaker-than-expected Inflation and Retail Sales reports turned Canadian dollar bulls into Canadian dollar bears. USDCAD roared higher, rising from 1.2789 to 1.2908.
“The bad economic data news was forgotten on Monday”. Said Rahim Madhavji, President of KnightsbridgeFX, a currency exchange company that helps Canadians get better exchange rates than the banks. Traders shifted their focus to the improving risk tone in markets. On Sunday, US Treasury Secretary Stephen Mnuchin proclaimed “trade war on hold.” He was referring to the progress made in the China/US trade talks last week. China’s announcement that it lowered tariffs on car imports to 15% underscored Mnuchin’s comment.
The improved global trade outlook supported oil prices which were already climbing on supply disruption concerns. OPEC’s continuing production cap added to production issues in Nigeria and Venezuela lifted WTI oil prices. On Monday, the Trump administration threatened Iran with “severe sanctions” if they didn’t halt their nuclear program and continued to fight in Syria. WTI oil spiked to $72.70/barrel and opened in Toronto close to that level, this morning.
The Canadian benefitted from improved risk tone and the soaring oil prices. USDCAD dropped from 1.2879 at Friday’s close to 1.2752 in early Toronto trading, today.
EURUSD found a bottom at 1.1710 yesterday and then climbed steadily until touching 1.1828 in Europe today. Profit-taking and broad US dollar weakness underpinned the move.
GBPUSD half-heartedly joined in the US dollar retreat, yesterday. That changed today after comments from Bank of England Monetary Policy Committee member Gertjan Vleghe predicted two more rate hikes in 2018, He qualified his forecast by saying it was subject to Brexit developments. GBPUSD climbed to 1.3482 from 1.3390 but has since dropped back to 1.3453.
USDJPY tracked firmer Treasury yields and topped out at 111.37, Monday. Widespread US dollar selling led to a profit-taking dip in Asia, overnight. The move was short-lived thanks to dovish comments from BoJ Governor Kuroda, repeating that monetary stimulus is needed until inflation hits 2%.
The Antipodean currencies climbed, helped by higher commodity prices and by broad US dollar weakness. Weaker than expected New Zealand Retail Sales data undermined NZDUSD initially, but all was forgiven and the currency pair recouped its losses
There is not any top-tier economic reports from Canada or the USD today. Traders will be looking to Wall Street and crude prices for direction while remaining alert for comments from the White House.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians.
