The Canadian dollar is underpinned by the latest Bank of Canada Business Outlook Survey. Business sentiment improved, albeit very modestly. The survey said that indicators for future sales suggest moderate growth with positive sales expectations in most regions. However, ongoing trade concerns are a drag.
The BOS also suggested that Canadian companies are managing the ongoing global uncertainties. That doesn’t give the Bank of Canada any incentive to cut interest rates at the October 30 monetary policy meeting. The prospect of steady Canadian rates even as the Fed eases policy again is supporting the Canadian dollar.
However, yesterday’s Canadian Retail Sales report was weak. August Retail Sales fell 0.1% compared to the upwardly revised, 0.6% increase in July. Gasoline price swings may have distorted the data, but the trend is lower.
The Canadian dollar closed yesterday’s session a tad weaker than where it started. Broad U.S. dollar demand stemming from disappointment around the latest Brexit developments sparked a minor unwind of the so-called riskier assets.
U.K. Prime Minister Boris Johnson was thwarted in his effort to fast track the latest Brexit deal through Parliament. He succeeded in getting MP’s to approve the bill but was unable to get them to agree to a quick debate. GBP/USD came under selling pressure, but sharply lowered risks for a "no-deal" Brexit limited the downside.
Sound-bites emanating from the U.S./China trade talks are mostly positive, but they are ignored. On Monday, President Trump speculated that because of the progress on Phase 1 of the trade talks, he might be able to sign it in November. Even Trade Representative Robert Lighthizer said negotiations were "on track" for an agreement. Previously, those types of comments would have fueled a "risk-on" mentality, boosting the antipodean currencies and the Canadian dollar. Not this time. Traders prefer concrete news to hot air.
The U.S. dollar opened in Toronto with small gains against all the major G-10 currencies except the Japanese yen. However, price action was confined to narrow ranges. EUR/USD drifted in a $1.1117-$1.1130 range due to a lack of top-tier economic data and ahead of Thursday’s European Central Bank (ECB) monetary policy meeting. This ECB meeting is Mario Draghi’s swan-song. His tenure as President has expired. He is to be replaced by former International Monetary Fund Managing Director Christine Lagarde.
USD/JPY continues to consolidate this month's gains even though prices are well below their peak. The rally was sparked by improving risk sentiment and a jump in US Treasury yields.
U.S. Housing Price Index and Canada Wholesale Sales data rolled in today but were unlikely to have an impact on FX trading.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
