The Canadian dollar extended last week’s gains in an uneventful overnight session. The press release from the US Office of the Trade Representative heralding the "historic and enforceable" Phase 1 deal, helped to support the Canadian dollar and the other commodity bloc currencies.
The press release lacked hard data. It said it "includes a commitment by China that it will make substantial additional purchases of U.S. goods and services in the coming years." But it doesn’t put a dollar value on said purchases. The fact sheet said the agreement addresses "numerous longstanding concerns in the areas of trade secrets, pharmaceutical-related intellectual property, geographical indications, trademarks, and enforcement against pirated and counterfeit goods," but doesn’t say how.
"The Expanding Trade chapter includes commitments from China to import various US goods and services over the next two years in a total amount that exceeds China’s annual level of imports for those goods and services in 2017 by no less than $200 billion." Chinese officials have indicated that those numbers are "best-case scenarios."
FX markets are quickly switching to "holiday mode." The U.S. dollar opened in Toronto on a mixed note compared to how it opened on Friday. There were plenty of economic reports released in multiple regions, but for the most part, their impact on FX trading was minimal.
NZD/USD is a tad firmer, rising from $0.6590 to $0.6612, on general U.S. dollar weakness, while ignoring soft Business NZ Performance of Services Index data. Across the Tasman Sea, unchanged Manufacturing Purchasing Managers Index data, (actual 49.4) was a non-factor while AUD/USD drifted in a $0.6870-$0.6888 band. Prices were also supported by better than expected Chinese data which included Industrial Production rising 6.2% y/y, and Retail Sales rising 8.0% y/y in November.
USD/JPY consolidated last week’s post Phase 1 trade deal gains in a 109.28-109.49, and it opened in Toronto at the top of that range. Higher U.S. 10-year Treasury yields supported prices.
Poor German Manufacturing PMI results (actual 43.4 compared to forecast of 44.5) and mixed Eurozone PMI reports capped EUR/USD at 1.1149, despite broad U.S. dollar weakness.
As has been the norm lately, GBP/USD was the liveliest G-10 major currency overnight. Prices rallied to $1.3420 due to the ongoing squeeze on short GBP/USD positions, with improved risk sentiment giving prices an added lift. However, weak U.K. Manufacturing and Service PMI data knocked prices back to $1.3325 before the recovered to $1.3370 in Toronto trading.
The Canadian dollar continues to grind higher, supported by the surge in West Texas Intermediate oil prices above $60.00/b.
There are not any top tier 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
