The Canadian dollar started the week at the same price it ended the previous week, even though the U.S. dollar inched higher against the major G-10 currencies. The U.S. gains were not impressive but were an indication of the underlying market sentiment.
There is plenty of domestic data on tap for Canadian dollar traders headlined by Wednesday’s inflation report. December Consumer Price Index is expected to rise 2.1% y/y compared to a 2.2%y/y increase in December, while Core CPI is forecast to be unchanged at 1.9% y/y.
Oil price fluctuations will be blamed for forecast deviations, thus diminishing the impact of this report on Canadian dollar trading. It will also be overshadowed by the release of the Bank of Canada monetary policy statement and quarterly Monetary Policy Report 90 minutes later.
FX price action was somewhat muted overnight, in part because U.S. markets are closed for Martin Luther King Day and traders didn’t want to get too involved.
USD/JPY traded sideways in a tight 110.05-110.20 range with traders’ content to await the Bank of Japan monetary policy decision due tomorrow. The BoJ is widely expected to leave interest rates unchanged, but there is a risk of growth and inflation forecast downgrades.
The Australian dollar continues to trade with a negative bias. Traders are waiting for the release of the Australian employment and inflation reports on Thursday. Both reports are forecast to be a tad softer than the previous data which could empower Aussie bears.
GBP/USD gapped lower at the Asia open, following comments by Chancellor of the Exchequer Sajid Javid, who warned that the U.K. would not align itself with European Union rules saying "there will not be alignment, we will not be a rule taker." The comment stoked fears of a hard Brexit and GBP/USD dropped to $1.2964 in Asia but have since recovered and are trading at $1.2995 in Toronto.
Concern about a hard Brexit roiled EUR/USD as well. The single currency fell from $1.1101 to $1.1083 and is hovering just above that level in Toronto. Traders are looking ahead to Thursday’s European Central Bank meeting, although the expectations for any market-moving revelations are meager.
The annual World Economic Forum in Davos, Switzerland begins today. There will likely be some headlines as the International Monetary Fund will present its World Economic Outlook. Unfortunately, with such luminaries as Greta Thunberg in attendance, the impact on financial markets will be negligible.
There are not any Canadian economic reports available today, and with U.S. markets closed, it suggests a tranquil session ahead.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
