USD/CAD - Loonie Weighed by Oil

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The Canadian dollar is being weighed down by falling oil prices. West Texas Intermediate, (WTI) the North American benchmark price for crude oil. continued to retrace gains made following last week’s attack on Saudi Arabia oil fields. At that time, a drone attack on the oil fields reportedly disrupted 50% of the Kingdom’s oil production. Last Friday, Saudi official claimed 50% of the lost production was restored, and today said it would have full production by next week. Yemeni Houthi’s claimed responsibility for the attack but U.S. and Saudi officials say Iran is the ringleader.

President Trump ordered U.S. troops to Saudi Arabia, which caused a ripple of risk aversion throughout global FX markets, which undermined the Canadian dollar in the process.

Today’s European FX session was lively thanks to flash Purchasing Manager Index data from France, Germany, and the Eurozone. German Markit Services PMI dropped to 41.4% from 43.5% in August. Eurozone Manufacturing PMI fell to 45.6 from 47.0%. EUR/USD declined to $1.0967 from $1.1024. That move triggered Canadian dollar selling due to broad U.S. dollar demand.

The British pound is a tad less perky than it was last Friday. GBP/USD slipped to $1.2424 from $1.2578 on Friday due to a combination of Brexit woes and Corporate drama. U.K. Travel company Thomas Cook collapsed, stranding 150,000 British travelers, which is just another negative to add to the GBP/USD sentiment ledger. U.K. Labour Party discord and various reports of no progress being made with resolving the Irish border issue raised fears that Britain was running out of time to avoid a "no-deal" Brexit on October 31.

The most recent round of U.S./China trade talks ended on Friday with both sides admitting the talks were "constructive." However, traders were not convinced after President Trump said he did not want a "partial deal" and after the Chinese delegation cancelled a scheduled trip to some Montana farms.

Bond traders were not impressed. The drove U.S. 10-year Treasury yields to 1.69% from 1.76%, and that move got the attention of USD/JPY traders. They sold the currency pair down to 107.32 from 107.77.

The Australian and New Zealand dollars saw some demand at the Asia open due to the China/U.S. trade talks, but the rally was short-lived. Prices peaked in the Asia afternoon and dropped steadily until finding a bottom in Europe. AUD/USD traders will hoping to get some currency direction guidance from tomorrows speech by Reserve Bank of Australia Governor Lowe.

There isn’t much in the way of actionable FX data available 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