The Canadian dollar is probing support. The domestic currency has been under pressure since last Thursday, and it has continued unabated, ever since. A lot of the pressure arises from external influences, particularly the widespread demand for U.S. dollars. Recent U.S. economic data has been positive, contrasting that of the euro-zone and U.K. and traders are looking for a strong Gross Domestic Product report on Friday.
The U.S. Federal Reserve has lowered the odds for any rate increases in 2019 which in turn sparked a renewed equity rally. The S&P 500 and NASDAQ posted record highs yesterday helping to lift global equity indices including Canada’s TSX, although its gains have lacked those of the American indices.
The U.S. dollar opened in Toronto with gains against the Antipodean currencies, euro and Canadian dollar. It was unchanged against the Japanese yen and British pound while the Swiss franc was the only currency to rise.
AUD/USD was the worst performing currency compared to Tuesday’s closing rate, thanks to a soft inflation report. Consumer Price Index was unchanged in Q1 compared to forecasts for a 0.2% increase. The currency got trashed with prices plunging from $0.7100 to $0.7030 in early Toronto trading. The drop broke key support levels, and traders are looking for further losses to 0.6870. NZD/USD drifted lower in concert with the Aussie.
USD/JPY languished within a narrow trading band. Gains were capped due to soft U.S. Treasury yields.
In Europe, a weaker than expected German IFO survey knocked EUR/USD lower. Prices declined from $1.1222 to $1.1195, and they are currently trading at $1.1205. A series of weak euro-zone economic reports contrasted against better than expected U,S, data and a dovish European Central Bank continue to weigh on prices.
The British pound continued to consolidate recent losses and traded quietly in a $1.2913-$1.2944 range overnight. U.K. politics and Brexit concerns are weighing on the currency.
The Canadian dollar isn’t getting any support from the recent surge in oil prices. West Texas Intermediate oil has soared over 55% since Christmas, and the Canadian dollar is less than 1% stronger.
The Canadian dollar is probing support ahead of today’s Bank of Canada monetary policy meeting and the release of the quarterly Monetary Policy Report. The market fully expects that the BoC will leave rates unchanged. However, the currency is under pressure because of concerns that the BoC will downgrade Canada’s growth outlook again, opening the door to a "rate cut" dialogue.
There are not any Canadian or U.S. economic data reports available today. FX direction may be determined by equity price movements.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
