The Canadian dollar was stuck in a rut in overnight trading. It wasn’t alone. The G-10 major currencies all opened in Toronto today right around yesterday’s closing levels. There was a bit of "to-ing" and "fro-ing", but the trading ranges were narrow and well-defined.
There are plenty of risk events occurring around the globe, but current information about those risks is hard to find. That is going to change, and it could be as soon as this afternoon or Friday morning.
The latest round of the U.S. and China trade negotiations are winding up today in Washington. Hopes that a deal will be announced imminently increased with news that Chinese Vice Premier Liu He will meet with President Trump this afternoon. As per Bloomberg, the new agreement gives China until 2025 to fulfill commitments on commodity purchases. Also, American companies will be allowed to wholly own businesses inside the country.
However, the reaction to what should have been positive news was tempered. That may be because Trump, believing himself to be a master deal-maker, is prone to incendiary tweets to extract last-minute concessions. He did it with the NAFTA negotiations, and it worked, so why not with China?
The British pound was lively. GBP/USD rallied to $1.3190 from $1.3150 on news that UK politicians voted to require the U.K. government to get a long extension to the Brexit negotiations. The rally quickly reversed when traders realized that the decision to extend discussions rests entirely with the European Union and not the U.K. Prices move lower in Toronto trading this morning as talks heated up about the prospect of a snap election and the risk of a Labour government.
EUR/USD traded aimlessly within a narrow band. Traders ignored a report that a group of German economists slashed their 2019 Gross Domestic Product growth forecast to 0.8% from 1.9%.
The Canadian dollar traded extremely quietly, locked within a narrow USD/CAD range of $1.3340-62. It is supported the steep rise in West Texas Oil prices in the past week, and it may continue to get support. WTI oil is underpinned by increased chatter about a China/U.S. trade deal which raises hopes that it would jump-start global economic growth.
If so, the sanctions against Venezuela and Iran alongside production cuts by the Organization of the Petroleum Exporting Countries suggests that oil demand will outpace supply, lifting WTI prices further.
The Canadian dollar continues to bask in the glow from the better than expected GDP data and suggestions that the Bank of Canada is not committed to a dovish monetary policy bias.
The currency could get a bit of support if this morning's Ivey Purchasing Managers Index data is higher than forecast.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians