The Canadian dollar is a tad firmer this morning, buoyed by a somewhat improved tone around the U.S. and China trade negotiations. The China Ministry of Commerce reported that U.S. Treasury Secretary Mnuchin and U.S. Trade Representative Robert Lighthizer had further discussions with Chinese Vice Premier Liu He, about a Phase 1 trade deal. Both sides said the talks were "constructive." Earlier, White House Economic Advisor Larry Kudlow said that they were close to an agreement.
Asia FX markets opened with a ripple of positive risk sentiment, which was tempered by the escalation of violence in Hong Kong. AUD/USD and NZD/USD were steady and happily consolidating gains from Friday. AUD/USD is close to resistance at 0.6830, which if broken, would target further increases to 0.6910. Asia equity indices followed Wall Street’s lead and closed with gains.
The Peoples Bank of China (PBoC) lowered its seven-day reverse repo rate (RRR) by five basis points, to 2.5%. USD/CNY inched higher as a result. The move was expected and didn’t have an impact on FX markets.
The Japanese yen traded softer, in part due to the unwinding of "safe-haven" trades, thanks to the positive vibes emanating from the U.S./China trade talks. However, last week’s fall in US Treasury yields limited the losses.
Sterling traders walked in to find that Boris Johnson’s Conservative party managed to widen its lead over Jeremy Corbyn’s Labour Party. GBP/USD traded higher, supported by fading risks for a "no-deal" Brexit. Traders are looking for a decisive break above $1.2980 to spark a rally towards 1.3140.
EUR/USD inched higher alongside broad U.S. dollar weakness and bullish technicals, supported by the price action above $1.1050.
Oil prices exploded higher on Friday, and they managed to hang on to those gains overnight. West Texas Intermediate oil climbed from $56.46 on Friday to $58.04 today. Demand was fueled by rising expectations of a Phase 1 US/China trade deal being announced and talk that Opec will extend production cuts.
The Canadian dollar drifted lower on the back of the improved risk tone with the spike in oil prices, helping the move. Traders are looking ahead to top tier domestic data and some monetary policy guidance from the Bank of Canada. Tuesday Canada Manufacturing shipments data are forecast to have dropped 0.6% in September, compared to August’s 0.8% gain. Wednesday, inflation data is released. October Consumer Price Index is expected to rise by 2.1% while Core CPI rises 1.9%. Friday’s Retail Sales data is expected at 0.0%, but the ex-auto’s component will show a healthy 0.7% gain. m/m.
There are not any notable economic reports from Canada or the U.S. available today.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
