The Canadian dollar was sidelined in overnight trading. In fact, almost all of the major G-10 currency pairs drifted quietly in narrow trading bands, the exception being the pound sterling.
GBP/USD fell from $1.3089 in Asia to $1.3012 just after the European session started. Prices inched higher and then soared to $1.3133 as the debate preceding the third Brexit vote began. Prices have bounced between $1.3080 and $1.31233 since the open of the Toronto session. Some MPs suggest that today’s vote is the last opportunity for the U.K. to secure the legal right to extend article 50 until May 22.
There were a lot of economic data releases in the U.K. today including nationwide Housing Prices, Q4 Gross Domestic Product, Current Account and Total Business investment. Q4 GDP at 1.4%, q/q was a tad better than expected, but the data was ignored.
EUR/USD languished in a narrow $1.1225-$1.1237 range in Asia, then dropped to $1.1211 in early Toronto trading before rebounding to $1.1235. There were more European Central Bank (ECB) officials reminding markets of the ECB’s dovish bias. Benoit Coeure said that interest rates would remain unchanged until the end of 2019, which helped maintain the EUR/USD bearish bias and undermined the Canadian dollar in the process.
USD/JPY rallied as Asia traders took a tweet from U.S. Treasury Secretary Steven Mnuchin as evidence that the China/U.S. trade talks were going well. Mnuchin said "U.S. TradeRep and I concluded constructive trade talks in Beijing. I look forward to welcoming China’s Vice Premier Liu He to continue these important discussions in Washington next week."
USD/JPY got additional support from rising U.S. Treasury yields.
Asia equity indices climbed on the back of the improved China/U.S. trade outlook, and that gave AUD/USD and NZD/USD a lift. However, the gains were erased in Europe when the US dollar started to climb.
USD/CAD traders sat on their hands during the overnight session. Broad U.S. dollar demand supported the currency pair while steady to firm oil prices capped the topside. Traders are looking ahead to this mornings January GDP data which is expected to be flat, which is a result compared to Decembers 0.1% decline. The risk to the estimates stems from the impact of Alberta’s oil production cuts.
U.S. data includes Personal Income and Spending, New Home Sales and Michigan Consumer Sentiment Index. There are a host of Fed speakers, but markets will be focused on the Brexit vote, Wall Street and investors are urged to be alert for month end/quarter end portfolio re-balancing flows
