The Canadian dollar moved aimlessly in a narrow range overnight. Price action was contained as FX traders bided their time until the European Central Bank (ECB) monetary policy decision this morning.
The U.S. dollar inched higher against the G-10 major currencies in a relatively quiet overnight session. Only the Japanese yen recorded a gain, and it was tiny. Oil and gold prices eked out gains on the back of the U.S. dollar strength.
EUR/USD traded with a negative bias in Asia and Europe but managed to recoup those losses in early Toronto trading. The German IFO survey was another negative for the single currency. Current Assessment, Expectations, and Business Climate surveys were lower than expected and paint a worrisome picture for the German economy. The weak data follows yesterday’s soft preliminary Manufacturing Purchasing Manager Index reports and a string of weaker eurozone economic releases.
The slow economic growth in the eurozone and stubbornly low inflation led ECB President Mario Draghi and various ECB officials to set the stage for a fresh round of monetary stimulus. The debate is whether it is to be announced today or at the September meeting.
GBP/USD traded sideways in Asia and Europe but climbed in early Toronto trading. Prime Minister Boris Johnson announced his Cabinet which is filled with "hard-Brexit" MP’s. However, gains may be short-lived due to the elevated risk of a "no-deal" Brexit and rising concerns about an election.
The antipodean currencies had a busy session. Westpac Bank economists predicted that the Reserve Bank of New Zealand would cut its benchmark interest rate two more times, with a 0.25% cut occurring at the August meeting. NZD/USD fell from 0.6705 to 0.6686 before inching higher in Toronto trading. Comments by Reserve Bank of Australia Governor Philip Lowe undermined AUD/USD. He warned that Australian rates would need to remain low for an extended time.
The Canadian dollar may have received a bit of support from confirmation that U.S. and Chinese trade negotiators will start a new round of talks, in Beijing on Monday. The news kept oil prices underpinned.
Wall Street gains following strong quarterly earnings reports added to U.S. dollar support. The prospect of even higher equity prices has offset fears of a 0.25% Fed rate cut next week.
Today’s U.S. June Durable Goods Orders data are expected to rebound from the disappointing results seen in May. They are expected to rise 0.7% compared to a 1.3% decline in May. The ex-transportation component is forecast to rise by 1.3%. Other data includes Jobless claims, Wholesale Inventories and Goods Trade balance. There are no Canadian economic reports available.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
