The Canadian dollar is on a bit of a hot streak. Friday, Statistics Canada reported Canada added 53,700 new jobs in September. The result greatly exceeded expectations for a 10,000-job gain and the loonie soared. Traders ignored the details of the data, which noted that the majority of the new jobs were in the self-employed and government categories.
The data lifted short term Canadian interest rates which served to widen the spread between Canada and U.S. rates. Traders downgraded risks that the Bank of Canada would cut interest rates at the October 30 meeting, which contrasts with dovish U.S. Fed expectations.
There was a lot of market impacting events over the weekend. The U.S. and China made progress on the trade talks, Brexit negotiations were racing down to the wire, and the European Union and the U.S. chastised Turkey for its attack on Kurds in Syria.
President Trump tweeted the following about the trade talks. "The deal I just made with China is, by far, the greatest and biggest deal ever made for our Great Patriot Farmers in the history of our Country. In fact, there is a question as to whether or not this much product can be produced? Our farmers will figure it out. Thank you China! ....Other aspects of the deal are also great - technology, financial services, 16-20 Billion in Boeing Planes etc., but WOW, the Farmers really hit pay dirt! Thank you to all Republicans in Congress for your invaluable help!"
AUD/USD and NZD/USD traders did not feel as enthusiastic about the trade details as Trump. AUD/USD dropped from $0.6798 to $0.6750, in part because there isn’t a trade deal or even a partial deal. The details that Trump tweeted are not finalized and not expected to be until some time in November. Canadian dollar traders were not concerned, and the loonie held onto Friday’s gains.
The British pound opened in Toronto on Tuesday where it closed on Friday. However, there was a lot of volatility with prices bounced in a $1.2520-$1.2694 range. Prices were boosted following a headline that European Union Chief Negotiator Michel Barnier said a deal was still possible. Then another headline popped up, reporting Barnier as saying the U.K. proposals were not enough and prices plunged. That kind of price action will be the norm until a deal is announced or the U.K. leaves the European Union.
U.S./China trade news and Brexit development will be the FX focus today. Canadian dollar price action will track EUR/USD moves.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
