The Canadian dollar is consolidating gains around significant USD/CAD support in the 1.3040-60 zone. It is having a good October, but so are the other major G-10 currencies, and that is because of an improved tone to risk sentiment.
The renewed U.S./China trade talks and a lack of hostile rhetoric about Beijing from the White House sparked an unwinding of safe-haven trades which contributed to a broad U.S. dollar selloff. The New Zealand dollar has been the best performing currency this month followed by the euro, and Australian dollar. Canadian dollar gains lagged their commodity currency cousins but still managed a respectable 1.60% increase.
Canadian dollar traders are patiently awaiting fresh guidance from the Bank of Canada. Officials from the central bank have been reticent since the September 4 meeting, and traders are eager to see how the improved tone to the China/U.S. trade negotiations, impacts their thinking. The BoC is widely expected to leave interest rates unchanged. The string of steady to strong economic reports and the mildly upbeat Business Outlook Survey may lead to upgraded economic forecast in the Monetary Policy Report (MPR), which will also be released.
The Federal Open Market Committee meeting is being held on October 30. Traders expect the Fed to cut rates by 0.25%. However, the jury is still out as to whether the Fed indicates if the cut is the end of the "mid-cycle adjustments" or leaves further cuts on the table.
Mario Draghi’s final meeting as President of the European Central Bank, yesterday, did not offer any surprises. The ECB left rates unchanged and warned that the eurozone economy remained weak. Today, and ECB Governing Council official said that if the ECB knew "last year, what we know today," they would never have ended quantitative easing. Those comments capped a mild EUR/USD rally in Europe. The release of the German IFO survey didn’t have much effect on EUR/USD trading.
GBP/USD markets were tame compared to price action earlier in the week. European Union Chief Trade Negotiator Michel Barnier said that the EU27 could not decide on the duration of a Brexit deadline until they know the U.K.’s election plans. Prime Minister Boris Johnson said he wants an election on December 12. However, Labour Leader Jeremy Corbyn said he would block that move unless Johnson agrees to take a "no-deal Brexit" off the table. GBP/USD traded in a $1.2824-1.2862 range and is testing the bottom of that band in early Toronto trading.
The only data of note is U.S. Michigan Consumer Confidence which suggests additional USD/CAD consolidation within a narrow band.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
