The Canadian dollar has been up and down like a yo-yo since Friday’s U.S. employment report. The Americans added 263,000 new jobs in April, easily beating the forecasts of 185,000. The headline sent the U.S. dollar soaring. The details knocked it back to earth. Average hourly earnings and average weekly hours were lower than expected, and U.S. dollar seller quickly emerged. The U.S. dollar closed in Toronto with losses across the board, against the G-10 major currencies.
U.S. dollar weakness wasn’t anywhere to be seen when Asia opened today. President Trump expressed his unhappiness with the pace of the China/US trade negotiations via a tweet yesterday, and it sparked a stampede into safe-haven currencies while sending global equity indices into free-fall.
Trump said: "For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods. These payments are partially responsible for our great economic results. The 10% will go up to 25% on Friday. 325 Billions (sic) Dollars.... ....of additional goods sent to us by China remain untaxed (sic), but will be shortly, at a rate of 25%. The Tariffs paid to the USA have had little impact on product cost, mostly borne by China. The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!”
The Australian and New Zealand dollars gapped lower in thin Asia market trading as China is one of their biggest trading partners. Both currency pairs were already trading with a negative bias ahead of central bank meetings on Tuesday and Wednesday. The Reserve Bank of Australia policy meeting is first, and although a rate cut is on the agenda, it is not a sure thing. The odds are much higher for the Reserve Bank of New Zealand to cut rates at Wednesday’s meeting.
USD/JPY plummeted on renewed safe-haven demand, falling from 111.09 to 110.29 That move may have been exaggerated as Japanese markets were still closed for Golden Week holidays.
GBP/USD rallied Friday on reports that U.K. Prime Minister Theresa May’s government planned to work closely with Jeremy Corbyn's Labour Party to get a Brexit deal approved by parliament. It gave back some of those gains due to broad U.S. dollar strength. FX liquidity was very poor as the U.K. was closed for a holiday.
President Trump’s tweet triggered a free-fall in oil prices WTI oil plummeted from Friday’s closing level of $61.87 U.S./barrel to $60.07/b.
The Canadian dollar was under pressure due to a series of disappointing domestic economic reports, and the pressure was exacerbated by the oil price plunge.
There isn’t any U.S. or Canadian data available today leaving speeches by many Federal Reserve officials and one by Bank of Canada Governor Stephen Poloz to entertain traders.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
