The Canadian dollar is trading in Toronto right where it closed on Thursday, after trading without conviction overnight. The Canadian dollar drifted higher alongside its antipodean counterparts when Caixin China Manufacturing PMI data came out at 51.7, compared to 51.5 in September. It was the highest level in two years. However, the gains were not sustained, and prices retreated during the European session.
AUD/USD received extra-support from domestic Producer Price Index reports, but not enough to offset pre-nonfarm payrolls demand for U.S. dollars that was seen in Europe. AUD/USD rallied from $0.6888 to $0.6910 before dropping to 0.6894 in early Toronto trading. NZD/USD tracked the rest of the commodity bloc currency moves and is trading in Toronto with a small gain compared to Thursday’s closing level.
USD/JPY traders were quiet. Prices drifted inside a 107.90-108.05 range as the fall-out from Wednesday’s steep drop in U.S. 10-year Treasury yields continued to weigh on the currency pair. 10-year yields were 1.843% on Monday, and they are trading at 1.693% this morning.
There is a whiff of risk aversion sentiment in the air. The U.S./China trade talks seem to have hit a stumbling block over the dollar size of U.S. agricultural products that China is expected to buy, alongside the degree of structural reforms demanded by the Americans. Chile’s cancellation of the APEC summit means that President Trump and China President Xi Jinping need to find another venue to meet if they are to sign the Phase 1 deal in November.
European traders were in is a mild U.S. dollar buying mood today. The greenback rose across the board ahead of the October U.S. employment report. The consensus forecast is for a gain of 80,000 jobs but the GM strike may have distorted the results by about 50,000 to 100,000 jobs. Arguably, the distortion makes today’s data meaningless.
Federal Reserve Chair Jerome Powell indicated that the Fed was on hold, suggesting that Wednesday’s 0.25% rate cut was the last of the "mid-cycle adjustments." However, that doesn’t mean the next rate move will be an increase. Powell said that rates would rise when inflation rises, but he didn’t see that happening. Today’s non-farm payrolls report won’t provide any data to change that view.
EUR/USD continues to be supported by Wednesday’s FOMC meeting. The decisive break above resistance in the $1.1110 area still needs to take out resistance at $1.1210 to suggest an extended rally. GBP/USD is directionless during the U.K. election.
There are two Fed speakers on tap today as well as the Institute for Supply Management Manufacturing Purchasing Managers Index report.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
