The Canadian dollar is off to the side, again. The currency pair remains rangebound. USD/CAD price action is locked inside a $1.3130-$1.3340 range and has been, since the beginning of the month. There isn’t anything on the horizon that will threaten that range.
Global central banks are in easing mode. The U.S. Federal Reserve cut interest rates this month as did the European Central Bank. The central banks in Australia and New Zealand cut interest rates earlier but not the Bank of Canada. The Bank of Canada’s last rate move was an increase of 0.25% to 1.75% on October 24, 2018. Interest rates have been left unchanged for the past seven policy meetings. Many economists penciled in a rate cut at the end of October, but recent strong domestic data has some of them reaching for their erasers. Steady BoC monetary policy alongside, steady to firm crude oil prices have managed to cap U.S. dollar gains.
Low FX volatility is a common theme. EUR/USD traded erratically in September. The price moves were contained in a $1.0925-$1.1080 range and European Central Bank, and FOMC policy meetings were not able to trigger breakouts in either direction. The same holds for USD/JPY which has see-sawed inside a $107.00-$108.45 band since September 5.
President Trump’s speech to the United Nations yesterday gave rise to modest safe-haven demand for Japanese yen, Swiss francs and Euros. The President adopted a belligerent tone about China. He said the Chinese were currency manipulators, demanded transfers of technology and had unfair barriers to trade. That wasn’t anything he hadn’t said before. He said that Iran is "one of the greatest security threats facing peace-loving nations today. All nations have a duty to act. No responsible government should subsidize Iran’s bloodlust. As long as Iran’s menacing behavior continues, sanctions will not be lifted. They will be tightened."
The Iran comments didn’t boost oil prices. Trump’s views on Iran were well known, so traders took their price direction from Saudi Arabia developments. The Saudi’s said that full oil production would resume ahead of schedule. Later the American Petroleum Institute reported weekly U.S. crude inventories had risen by 1.4 million barrels. Increased crude supplies in the face of slowing global economic growth drove West Texas Intermediate prices from $58.68/barrel on Tuesday to $56.18/b today.
The U.S. dollar came under pressure yesterday when Speaker of the House of Representatives Nancy Pelosi said she would initiate impeachment proceedings against Trump. However, the sell-off reversed itself overnight, and the U.S. has more than fully recovered all of the losses in Toronto trading today.
There isn’t any data of note from Canada or the U.S., leaving equity markets and headlines to drive FX direction.
