The Canadian dollar inched higher in another quiet overnight session. The currency recouped yesterday’s losses and is at the session high in early Toronto trading. The gains were made alongside AUD/USD and NZD/USD which firmed, garnering some support from U.S./China trade developments.
FX traders appear to be ignoring the drama around President Donald Trump’s possible impeachment and are more focused on trade developments. Trump’s comments yesterday helped improve sentiment around the U.S./China trade negotiations. Trump said about China "They want to make a deal very badly... It could happen sooner than you think." He went on to say, "China is starting to buy our agricultural product again. They’re starting to go with the beef and all of the different things, pork, very big on pork." Both sides are expected to meet in Washington in October.
The commodity bloc currencies were underpinned in Asia due to Trump’s trade remarks and by comments from Reserve Bank of New Zealand Governor Adrian Orr, who said New Zealand was in a "good position," adding that it was unlikely that the RBNZ would need to use unconventional monetary policy tools. NZD/USD jumped to $0.6310 from $0.6273 on the news.
AUD/USD underperformed its Kiwi cousin. AUD/USD slipped to $0.6748 from $0.6763 as some traders were worried that the Reserve Bank Australia would cut interest rates next week.
The Canadian dollar is getting a bit of support from oil prices. West Texas Intermediate bounced off Wednesday’s low thanks to the improving tone around U.S./China trade talks. However, gains are capped by concerns that with Saudi Arabia production returning to normal, oil supply will continue to outpace demand in the coming months.
The joke that is U.K. politics drove GBP/USD lower overnight. Prices dropped to $1.2304 from $1.2309 as traders re-evaluate their views on the Brexit outcome. Prime Minister Boris Johnson does not appear to have a lot of support for his determination to take Britain out of the E.U. on October 31. Many of his party members, as well as the opposition, want to get an extension to the deadline.
EUR/USD dropped to $1.0924 from $1.0964 and is sitting just above the low in early Toronto trading. The single currency is being weighed down by the European Central Bank’s new quantitative easing program and their dovish monetary policy outlook, as well as week euro-zone economic data.
U.S. Q2 Gross Domestic Product data is expected to be unchanged at 2.0% y/y. Other US data reports include Initial Jobless claims, Personal Consumption Expenditure prices and Pending Home Sales. These reports are not expected to generate any lasting FX activity. The Canadian calendar is empty.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
