The Canadian dollar drifted sideways in overnight trading. It wasn’t alone. FX traders were unwilling to get very involved ahead of this mornings Q1 GDP data from the US. The forecast is that Q1 GDP will rise 2.1% compared to the 2.2% gain in Q4 2018.
Asia FX markets were quiet. Chinese President Xi Jinping’s comments on trade and reports that he could be heading to Washington in June to sign a trade agreement gave the Australian and New Zealand dollars a boost. Xi said that China would open its markets to more companies while at the same time increase imports of goods and services.
The remarks weren’t anything new, but on a “slow-news” day, had an impact.
USD/JPY traded firmer in a 111.46-76 range. Traders appear to be ignoring dovish comments from Bank of Japan officials. Higher than forecast Retail Trade data slightly offset soft Industrial Production and an increase in the unemployment rate to 2.5% from 2.3%. Traders are also looking ahead to "Golden Week" holidays, starting on April 27.
EUR/USD traded quietly but maintained its negative bias. European Central Bank officials continue to deliver dovish comments and euro-zone data has been mixed to weak. Traders are leery about a better than expected U.S. Q1 Gross Domestic Product report triggering another EUR/USD selloff.
Swiss National Bank President Thomas Jordan reminded markets that negative interest rates and FX intervention were tools that would be used, when appropriate, which underpinned USD/CHF.
In the UK, GBP/USD has recouped some of this week’s losses but prices are weighed down by broad US dollar strength, and the lack of progress on Brexit.
Oil prices collapsed on reports that Saudi Arabia and the Organization of the Petroleum Exporting Countries were ready to increase production to offset the loss of Iran crude due to U.S. sanctions. WTI collapsed from $66.62 U.S./barrel yesterday to $63.88/b overnight. The drop erased all of this week’s gains. However, prices are well above their April 1 opening level.
The Canadian dollar trade aimlessly in a narrow USD/CAD range of 1.3470-95 overnight. Traders are continuing to digest the Bank of Canada’s abrupt reversal in its monetary policy outlook. The BoC erased the reference to raising rates in the latest interest rate statement and no longer seems concerned about achieving the "neutral rate." BoC Governor Stephen Poloz was interviewed by Maclean's magazine last night. Unfortunately, it was mostly a repeat of his Monetary Policy Report opening statement.
The Canadian data cupboard is a bare as Old Mother Hubbard’s, which leaves U.S. dollar sentiment to dictate direction. Arguably, better than expected U.S. data will have a more significant impact on the Canadian dollar than if the data is weaker than forecast.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
