The Canadian dollar came under pressure early in Asia, thanks to a short-term spike in risk aversion sentiment. USD/CAD jumped to $1.4063 from Monday’s closing rate of $1.4016, due to China actions against Australia.
China announced it was banning imports of meat from four Australian suppliers, which many believe is punishment for Australia’s demand for an investigation into the coronavirus outbreak. China appears to be following through on threats to stop purchasing Australian agricultural products.
The Australian dollar plunged on the news, but fully recovered its losses and is trading in Toronto higher than where it closed yesterday. Weaker-than-expected National Australia Bank Business Confidence Index for April (actual -34 vs previous -22) wasn’t a trading factor.
NZD/USD tracked AUDUSD moves. Traders are awaiting the Reserve Bank of New Zealand monetary policy meeting tomorrow. They are widely expected to leave interest rates unchanged but may expand their quantitative easing program.
USD/JPY traded uneventfully in a 107.32-107.69 range with prices close to the low in early Toronto trading. Prices are supported by steady to firm U.S. 10-year Treasury yields which are at 0.71% but concerns around renewed safe-haven demand from another coronavirus outbreak, is weighing on prices.
GBP/USD enjoyed a lively overnight session. Prices dipped to $1.2289 in Asia, then rallied steadily, reaching $1.2376 in Toronto. Traders ignored comments from Bank of England Deputy Governor Ben Broadbent who appeared to warn of negative interest rates. The BoE overnight rate is 0.10% and Broadbent said "The committee are certainly prepared to do what is necessary to meet our remit with risks still to the downside. Yes, it is quite possible that more monetary easing will be needed at the time.”
EUR/USD is trading at its overnight peak in anticipation of risk-friendly comments from Minneapolis Fed President Neel Kashkari, and Philadelphia Fed President Patrick Harker.
Oil prices climbed following reports that Saudi Arabia will cut June crude production by an additional 1.0 million barrels per day.
The Canadian dollar is closely tracking U.S. dollar sentiment, while getting some additional direction from crude prices. The intraday and short term USD/CAD technicals are bearish, looking for a break below $1.3960 to extend losses to $1.3910 and then $1.3850.
U.S. Consumer Price Index fell 0.8%, as expected and the news was ignored by Canadian dollar traders.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
