The Canadian dollar is rangebound. The currency never recovered from the selloff on Friday after the release of employment reports from the U.S. and Canada. The U.S. jobs report was strong. Non-farm payrolls rose 250,000, and the unemployment rate was steady at 3.7%. The news powered broad U.S. dollar demand against the G-10 major currency pairs and lifted U.S. Treasury yields at the same time.
The Canadian employment report was not nearly as impressive. Canada added 11,200 jobs in October, a touch above the 10,000 predicted. The unemployment rate inched lower, falling to 5.8% from 5.9%.
The Canadian dollar was also hit with weaker trade data. Imports and exports declined, and the tiny September surplus became a $0.42-billion deficit. Falling oil prices exacerbated the Canadian dollar selling.
FX markets were extremely quiet in Asia and Europe on Monday. The looming U.S. mid-term elections overshadowed the economic reports on Tuesday. There is enough uncertainty about the results for traders to bide their time and keep their powder dry. The Democrats are widely expected to win enough seats to get control of the House of Representatives. If so, the U.S. dollar could suffer on fears they would try to roll back tax cuts or initiate impeachment proceedings against President Trump.
The surprise would be if the Republicans maintained control of the House. The U.S. dollar would rally, and Trump would see the win as validation for his trade and immigration policies.
China President Xi Jinping addressed delegates at the Shanghai Trade Expo. He said China would lower import tariffs and make it easier for foreign firms to access the economy. He also didn’t say anything new.
The Canadian dollar drifted in a narrow band, bouncing between USD/CAD support at $1.3050 and resistance at $1.3160. Bank of Canada (BoC) Governor Stephen Poloz is speaking in the U.K. The topic is "What we are hearing from various financial markets and the implications for monetary policy", and it is followed by a question and answer session. He has been speaking a lot. He had a press conference after the Monetary Policy Report was released on October 24. On October 30, he addressed the House of Commons Standing Committee on Finance and gave a similar speech to the Standing Senate Committee on Banking, Trade, and Commerce, the next day.
Today’s speech may have an impact on the Canadian dollar if he talks about how recent financial market developments, will impact the BoC’s interest rate outlook. The BoC repeatedly claims to be "data dependent", and recent data has been mixed.
The Canadian dollar will remain in a USD/CAD range of $1.3050-$1.3160 until after the results of Tuesday’s U.S. elections are known.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
