FX markets got off to a slow, but nervous, start overnight. The Asia Pacific Economic Cooperation (APEC) summit ended acrimoniously. For the first time in over 20 years, the attendees did not issue a joint statement. China and the U.S. were to blame. Chinese President Xi Jinping said, "Unilateralism and protectionism will not solve problems, but add uncertainty to the world economy," taking a direct shot at the U.S.. It did not go over well. U.S. Vice President Mike Pence retorted: "China has taken advantage of the United States for many, many years and those days are over."
That exchange dashed hopes that Presidents Trump and Xi would break new ground on the trade front at the Argentina G-20 meeting, at the end of the month. It also sparked demand for safe-haven trades. The Japanese yen and the Swiss franc rallied overnight while the Canadian, Australian and New Zealand dollars lost ground. However, the moves were relatively small, reflecting the lack of trading enthusiasm.
EUR/USD opened in New York unchanged from Friday’s close. The mild bout of risk aversion supported the single currency while the ongoing European Union and Italy budget impasse limited topside gains.
The British pound pounding continued in trading on Monday. GBP/USD opened at $1.20863 and touched $1.2797 in early Toronto trading. U.K. Prime Minister Theresa May addressed the Confederation of British Industry this morning in hopes of garnering support for her Brexit deal. This mornings price action suggest that traders were not impressed. However, GBP/USD is just one positive headline away from a 0.200 point rally, especially considering the number of short sterling positions.
Falling oil prices have undermined the Canadian dollar. West Texas Intermediate (WTI) touched $54.88 on Friday but bounced to $57.68 overnight on talk that Russia and Saudi Arabia would orchestrate new production cuts at the meeting of the Organization of the Petroleum Exporting Countries (OPEC) on December 6. The bad blood between the U.S. and China at the APEC meeting supported the view of slowing global economic growth from a protracted China/U.S. trade war. Oil prices reverse the rally and are trading near the overnight $56.37 low, which managed to put a floor under Canadian dollar gains, as well.
Looking ahead, traders are expecting the Canadian dollar will get fresh support from top-tier economic data releases at the end of the week and the federal government on Wednesday. Finance Minister Bill Morneau will table a "Fiscal Update" and analysts are speculating it will contain some new fiscal stimulus which if true, would underpin the Canadian dollar.
Thursday, November 22 is Thanksgiving Day in America. Trading volumes in U.S. markets will diminish steadily throughout the week until they close altogether, as Americans head home for the holidays
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
