Canadian dollar traders are hoping for some insight into the Bank of Canada’s (BoC) policy thinking today. BoC Senior Deputy Governor Carolyn Wilkins is speaking in Montreal at 1:00 pm. Her topic is "Major public policy issues around monetary policy frameworks and how those issues have become more complex in the post-global financial crisis world." FX traders will be listening carefully for fresh insight into the BoC’s domestic economic outlook and what that means for interest rates. The speech is drawing more attention to the drought of domestic economic data, leaving traders to seek guidance elsewhere.
The Canadian dollar is vulnerable to risk aversion trade selling stemming from Wall Street. The Dow Jones Industrial Average (DJIA), S&P 500, and NASDAQ closed yesterday with substantial losses fueled by plummeting tech stocks. Asia equity indices followed in Wall Street’s footsteps as did European bourses.
The equity market weakness led to a mixed U.S. dollar performance overnight. The Japanese yen and the Swiss franc scratched out small gains as did the New Zealand dollar. The Australian dollar lost ground following somewhat downbeat comments from Reserve Bank of Australia Governor Philip Lowe. He warned that protectionist trade policies would have a negative impact on global growth, which FX traders took to mean Australia growth.
The Japanese yen got an added lift from soft U.S. Treasury yields, but remarks by Bank of Japan Governor Kuroda limited gains. The BoJ governor said that negative interest rates were an important part of policy and warned that the BoJ wouldn’t achieve its inflation target in 2019.
EUR/USD technicals turned bullish yesterday when prices broke above resistance at $1.1450. However, the gains were not sustained. EUR/USD traded lower in early Toronto trading, undermined by a lack of progress in the European Union and Italy budget discussions.
European equity indices are in the red which added to the single currency’s negative outlook.
Sterling prices have been reasonably steady. U.K. Prime Minister Theresa May continues to sell her Brexit deal to the British people. The risk of the P.M. facing a "non-confidence” vote diminished as the unhappy Members of Parliament were unable to secure the required 48 MP’s needed to initiate the ballot.
The Canadian dollar was on the sidelines overnight. The mild risk aversion sentiment and soft oil prices underpinned prices while gains were limited ahead of Ms Wilkins speech. Canadian dollar traders are concerned about oil prices. West Texas Intermediate prices continue to be pressured by global economic slowdown concerns from the China/US trade war, rising US crude inventories and increased US oil production will overcome the loss of Iran oil due to US sanctions.
There aren’t any Canadian data due today. U.S. Building Permits and Housing Starts could undermine Wall Street if the data is weaker than expected. If so, it could lead to fresh Canadian dollar selling.
