The Canadian dollar is under pressure as another bout of risk aversion sentiment blows through FX markets. U.S. President Trump continued to take shots at China, tweeting, on Saturday, "China wants to make a deal so badly. Thousands of companies are leaving because of the Tariffs, they must stem the flow. At the same time China may be hoping for a Democrat to win so they could continue the great ripoff of America, & the theft of hundreds of Billions of $’s!" There wasn’t anything new in the tweet. The tweet just added to the perception that Trump doesn’t want a deal anytime soon.
Negative risk sentiment, stoked by the escalating violence of protests in Hong Kong was a major factor. Protesters faced water-cannons and rubber bullets and forced the closure of the Hong Kong airport. Chinese officials are describing the protests as terrorism, perhaps in a prelude to military action.
European and UK traders are nervous as the deadline for a "no-deal" Brexit nears. The U.K. Guardian reported that British diplomats would stop attending day-to-day European Union meetings within days, in preparation for Brexit.
Asia FX markets opened on a quiet note, but AUD/USD and NZD/USD came under pressure later in the session. NZD/USD dropped to $0.6441 from $0.6447 after a New Zealand Treasury paper suggests that the Overnight Cash Rate (OCR) could be cut to -0.35%, if needed.
AUD/USD continues to suffer from the Reserve Bank of Australia’s dovish outlook.
Risk aversion sentiment fueled demand for the Japanese Yen, as 10-year U.S. Treasury yields fell to 1.685% from 1.748%. In addition, EUR/USD selling pressure triggered EUR/JPY selling, which helped to drive USD/JPY to 105.16 from 105.68. Japan/South Korea and U.S./China trade tensions are also causing safe-haven demand for yen.
The Canadian dollar managed to shrug off the impact of a worse-than-expected domestic employment report on Friday, but it is still feeling the effects. The Labour Force Survey showed Canada losing 24,000 jobs in July, which was a lot worse than the 12,000 gain that was expected. USD/CAD spiked higher on the news, rising from $1.3210 to $1.3270 immediately. The move was fully reversed by the close after traders determined that a weaker-than-expected employment report was overdue. Nevertheless, the weak data gave the Bank of Canada ammunition to support cutting rates, if it chooses to follow the majority of the G-10 central banks.
The Canadian dollar was undermined when Wet Texas Intermediate oil prices traded down from $54.41/barrel to $53.58/b. U.S./China trade war concerns have overwhelmed support from production cuts by the Organization of the Petroleum Exporting Countries
There are not any Canadian economic reports due today.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
