The Canadian dollar got a reprieve. USDCAD was threatening to break resistance at 1.3040 overnight. If it had been successful, a test of 1.3125 was likely. The reprieve was granted in Europe. A mix of better-than-expected Eurozone and German economic reports gave EURUSD a lift. As a rising tide lifts all boats, a rising euro lifts all currencies. (or most of them) It wasn’t just the data underpinning EURUSD. The Italian political developments helped to calm nervous markets. The 5 Star Movement and the League renewed their efforts to form a government that would pass muster with the pro-Eurozone President.
The Canadian dollar climbed steadily during the European session and extended its gains in early Toronto trading. USDCAD slid from 1.3038 to 1.2973. The Canadian dollar is supported by a bounce in oil prices, which had been falling all week. WTI oil climbed from $66.32/barrel to $67.19/b.
Canadian dollar traders were patiently waiting for this morning’s Bank of Canada (BoC) policy statement. The BoC is widely expected to leave interest rates unchanged. The statement is expected to be cautious. There is a heightened risk that the US threat of 25% auto-tariffs, combined with concern about the longevity of the NAFTA agreement may lead to diminished expectations for a June rate increase. The US/China trade spat, a drop in oil prices and Eurozone drama are unsettling global financial markets and more reasons for a cautious BoC stance.
The Bank of Canada did not raise rates but the changes of a rate hike in July have increased as a result of the press release. Talk about inflation has boosted expectations that a rate hike is on the way and the Canadian dollar has rallied as a result. Said Rahim Madhavji, President of KnightsbridgeFX, a Canadian currency exchange company that helps Canadians get better exchange rates than the banks.
New York closed with a negative tone and under a cloud of risk aversion. The major New York equities closed in the red. Asia traders took their cues from New York. They sold equities and traded defensively. NZDUSD rallied after the Reserve Bank of New Zealand released their Financial Stability Report. The outlook was mildly positive, and NZDUSD rallied, rising from 0.6884 to 0.6947 as this is written. AUDUSD climbed in tandem with Kiwi.
USDJPY traded with a negative bias in early Asia trading, dropping from 108.61 to 108.36, following the drop in Treasury yields during the New York session. Yields rebounded and so di USDJPY which is currently trading at 108.92.
In Europe, better than expected Eurozone and German economic data distracted FX markets from the Italian political drama. Italy’s 5 Star Movement and the League are reportedly huddling together, attempting to form another government which will pass scrutiny from the Italian President. The combination of the data and the political development lifted EURUSD from 1.1519 to 1.1640.
There is a lot of US data this morning, including another update for Q1 GDP, PCE and Wholesale trade. Canadian data includes Raw Materials and Wholesale sales.
