USD/CAD - Canadian Dollar Mildly Risk-Averse

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The Canadian dollar is suffering from a mild dose of risk aversion, which it caught from the other commodity bloc currencies.

AUD/USD and NZD/USD were under pressure overnight, in part, because of low expectations for this week’s China/U.S. trade talks. Bloomberg reported that Chinese officials are signaling a reluctance to agree on a broad trade deal. China does not want to include reforming its Industrial policy or government subsidies in these negotiations. Skeptics see the change in China’s strategy as a not-so-subtle attempt to exploit President Trump’s impeachment headaches. The Canadian dollar mirrored the antipodean price action.

The clock is ticking down to the October 31 Brexit deadline. There are conflicting reports about the European Union’s reception to U.K. Prime Minister Boris Johnson’s Irish border plan. Prices are supported because Johnson is legally required to ask the E.U. for an extension to the deadline. E.U. officials have been told the discussion are going nowhere, and they agreed that the latest U.K. proposals are not acceptable. Nevertheless, GBP/USD shrugged off data-related weakness and rallied from $1.2289 to $1.2336. GBP/CAD demand undermined the loonie.

EUR/USD traded in a $1.0963-$1.0989 range. Prices tracked Sterling moves but remained under pressure due to weaker than expected German factory orders data, bearish technicals and a dovish European Central Bank. Traders are biding their time ahead of the release of the U.S. Federal Open Market Committee minutes on Wednesday, and the start of the U.S./China trade talks.

USD/JPY is weighed down by safe-haven demand for yen and falling U.S. Treasury yields. 10-year Treasury yields dropped from 1.661% on October 2, to 1.512% overnight.

Fed Chair Jerome Powell’s speech on Friday was ambiguous at best. He described the U.S. economy as "being in a good place." Then he hedged himself, saying: "While we believe our strategy and tools have been and remain effective, the U.S. economy, like other advanced economies around the world, is facing some longer-term challenges—from low growth, low inflation, and low interest rates," adding the Fed is "examining strategies that will help it achieve its inflation goal of 2%."

His remarks followed Friday’s U.S. employment report. Non-farm payrolls were slightly worse than expected but that was enough for traders to raise the odds for a U.S. rate cut on October 30 to 100%.

The Canadian dollar continues to track broad U.S. dollar moves against the major G-10 currencies with the impact of domestic data not having a lasting impact on intraday price action. The domestic and U.S. economic calendars are empty 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