The Canadian dollar broke below minor support overnight, and the move shifted the focus to further losses in the short-term. The Canadian dollar is being undermined by the recent downturn in crude oil prices and renewed U.S. dollar demand against the major G-10 currencies.
The FX market traded quietly during the Asia morning, but things perked up after the Reserve Bank of Australia released the minutes from the July 2 meeting. RBA officials continued to be concerned about the lack of wage growth and the softness in the jobs market and feared further weakness in the coming months.
Analysts concluded that the RBA would cuts rates again and sooner than previously expected. AUD/USD fell from $0.7043 to $0.7025 and is trading in Toronto with a negative bias due to broad U.S. dollar strength. NZD/USD outperformed the Australian dollar thanks to New Zealand inflation. Q2 CPI q/q rose 0.6%, well above the 0.1% seen previously.
USD/JPY traded in a narrow band. Prices were supported US dollar strength, but gains were limited do to a minor dip in U.S. Treasury yields.
FX traders were busy in Europe. GBP/USD plummeted from $1.2519 to $1.2410 in Toronto trading on renewed fears that the U.K. will crash out of the European Union without a deal. Those fears were sparked after both Tory leadership candidates Boris Johnson and Jeremy Hunt said they would scrap the Irish border deal. Scrapping the deal would not go over well in the European Union which could lead to a "no-deal" Brexit. The Brexit fears overshadowed a stellar U.K. employment report.
EUR/USD came under selling pressure after German and euro-zone ZEW data was weaker than expected. Middle East tensions and trade worries led to a drop in Economic Sentiment which knocked EUR/USD from $1.1262 to $1.1218.
Oil prices have given back some of their Tropical Storm Barry gains after the weather system was less severe than predicted. WTI oil prices have dropped from yesterday’s peak of $60.80 U.S./barrel to $59.21 overnight. Traders are looking ahead to the weekly API, and EIA crude supply surveys for fresh insight.
There are a lot of economic reports on tap today. U.S. Retail Sales headlines the release calendar and analysts expect a weak result due to lower gasoline prices.
June Retail Sales are forecast to increase by 0.1%, compared to May’s 0.5% gain. Other data include Import/Export Prices, Industrial Production, Capacity Utilization, Business Inventories and NAHB Housing Market Index.
There isn’t any Canadian data of note, leaving the Canadian dollar to track broad U.S. dollar moves.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
