USD/CAD - Loonie Surges

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The Canadian dollar surged higher Friday and then consolidated those gains overnight. The Canadian dollar demand followed the release of U.S. and Canadian employment reports. U.S. non-farm payrolls results were weaker than expected while the Canadian numbers beat the forecasts. USD/CAD tumbled from $1.3235 to $1.3157 where they are sitting in early Toronto trading.

The Canadian dollar is getting support from a Federal Reserve Chairman Jerome Powell and crude. Oil prices added to Friday’s post NFP gains.

West Texas Intermediate climbed from $56.87 on Friday, to $57.25 overnight, in part due to the improved outlook for global growth after a positive shift in the tone of the U.S./China trade talks. Prices got an added boost following comments by Saudi Arabia’s new oil minister,
Prince Abdulaziz bin Salman. He said his government’s oil policy would not change. He added that the partnership between the Organization of the Petroleum Exporting Countries, Russia and non-OPEC countries would stay in place.

Powell did not offer any new insight for the U.S. interest rate outlook.

Powell downplayed recession concerns and predicted 2019 GDP growth of between 2.0 and 2.5%. The odds for a rate cut next week stayed at 91%.

President Trump’s tariff war with China is having an impact. China’s trade surplus shrank in august undermined by a 1.0% drop in exports.

The British pound was the biggest mover in the overnight market. GBP/USD gapped lower when Asia opened, falling to $1.2235 from Friday’s close of $1.2289. Traders were spooked by reports that Conservative Cabinet Minister Amber Rudd resigned her post.

Also, there was a report that France would oppose granting an extension to the October 31 Brexit deadline. A series of better-than-expected U.K. economic data, led by a 0.3% m/m rise in June Gross Domestic Product, turned sentiment positive, triggering a steep short-covering rally. GBP/USD climbed to $1.2384 in early Toronto trading.

The GBP/USD rally pulled EUR/USD higher. The single currency rallied to $1.1041 from $1.1017, garnering a modicum of support from better than forecast German trade data. Nevertheless, expectations that the European Central Bank will renew monetary policy easing on Thursday capped gains.

The Japanese yen faded under the glare of improved risk sentiment. USD/JPY inched up to 107.07 from 106.77 supported by the slightly more positive tone to the U.S./China trade talks. A rise in U.S. Treasury yields underpinned prices.

The Canadian dollar wasn’t the only commodity currency to rise. AUD/USD and NZD/USD extended last week’s gains, as well. AUD/USD got additional support after Home Loans rose 5.0% in July.

NZD/USD continued to squeeze short positions.

There aren’t any U.S. or Canadian economic data release of note scheduled to be released today.

Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
Learn how KnightsbridgeFX can help you save up to 2% when buying or selling US dollars compared to your Canadian bank’s rates – click here to compare bank rates