The Canadian dollar drifted higher overnight as did the Australian dollar. These were the only currencies to eke out gains against the U.S. dollar, compared to Tuesday’s closing levels. GBP/USD led the rest of the G-10 majors lower in an uneventful overnight session.
The Canadian dollar tested major support yesterday and once again, it held. Prices were supported by better than expected Manufacturing Shipments data. Shipments fell 1.2%, which was less than the 1.7% that was forecast. Statistics Canada noted that for the second quarter, manufacturing sales rose 1.7 %. Traders ignored the tiny drop in Capacity utilization rate from 82.2% in May to 82.1% in June.
The Canadian dollar also benefited from yesterday’s end of day American Petroleum Institute weekly crude stocks report. It showed that inventories fell 3.5 million barrels in the week ending August 16. West Texas Intermediate (WTI) oil prices climbed from $56.08/barrel to $56.85/b in early Toronto trading. Ongoing Middle East tensions and the prolonged US/China trade war are supporting prices.
The Canadian dollar continues to be supported by improving domestic data, like last week’s firm existing home sales data. That suggests the Bank of Canada will leave interest rates unchanged at next month’s meeting. Traders are hoping for confirmation of that view from a higher than expected inflation reading today. July CPI is forecast to rise 0.4%
President Trump raised a bit of a ruckus. He asked Denmark if he could buy Greenland. The Danes laughed at him and said it wasn’t for sale. He got his knickers in a knot and cancelled a planned state visit. The news had zero impact on financial markets.
Brexit issues have led to rather violent GBP/USD price action in the past few days. Yesterday GBP/USD soared to $1.2178 from $1.2067 following comments from German Chancellor Angela Merkel suggesting a willingness to discuss the thorny Irish-border backstop issue. GBP/USD was bought on the prospect of positive comments or headlines arising from today’s Merkel/Boris Johnson meeting. However, other European Union officials said that they are unwilling to reopen the backstop talks. GBP/USD retreated and gave up nearly half of yesterday’s gains.
Asia FX markets were quiet and on the defensive. Asia equity indices were slightly lower, following the moves on Wall Street. USD/JPY rallied on the back of higher Treasury yields but gave back some of those gains when the yields retreated. AUD/USD outperformed NZD/USD again due to different central bank interest rate policies.
The Federal Open Market Committee minutes from July 31 are released this afternoon. They should have a limited impact as they are considered "old news." Fed Chair Jerome Powell’s upcoming speech is Friday.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
