The Canadian dollar traded aimlessly despite a jump in global risk sentiment sparked by a Chinese equity market rally. The Shanghai Shenzhen CSI 300 soared 5.7% after a front-page editorial in a newspaper trumpeted that a "bull market" was necessary to strengthen China’s position on the world stage. Other Asian equity indexes followed the Chinese lead.
Japan’s Nikkei 225 rose 1.8%. The Australian ASX 200 index proved the exception. It closed slightly lower, likely due to caution ahead of the Reserve Bank of Australia policy meeting Tuesday.
Traders ignored geopolitical news. A nuclear reactor in Iran suffered severe damage from a fire, which many rumours attributed to Israeli military action. The US Navy is conducting "exercises" with two carrier groups in the disputed South China Sea. The Chinese Navy is doing the same thing. FX markets do not care.
Traders also ignore the surge in U.S. coronavirus cases. The Washington Post reports the seven-day average case total set a record for the 27th consecutive day. The news is not enough to dissuade Wall Street from buying stocks. S&P 500 futures are 1.3% higher in early trading.
EUR/USD surged through resistance at $1.1300 in Toronto trading today, powered by the rise in risk sentiment and better than expected Eurozone data.
German factory orders rose 10.4% m/m in May, after falling by 26.2% in April. Eurozone Retail Sales recouped all of its April losses, increasing 17.8% m/m in May. The news lifted EUR/USD from 1.1244 to 1.1327 in Toronto. Comments from European Central Bank board member Francois Villeroy suggesting that the French economy would rebound better than expected, also supported prices.
GBP/USD traded in a $1.3463-$1.2518 range and is trading at the top in Toronto. Rising global equity markets fuel the gains. However, linger concerns around a "no-trade deal Brexit" may cap gains.
The Bank of Canada quarterly Business Outlook Survey (BOS) was conducted at the height of the COVID-19 lockdowns and the results are unlikely to be positive. The survey should not have much of an impact on USDCAD trading as it doesn’t reflect the current landscape.
The Canadian dollar continues to garner a modicum of support from steady to firm crude oil prices.
West Texas Intermediate bounced inside a $40.26-$41.06/barrel range.
Today’s U.S. data includes the Institute for Supply Management Non-manufacturing Purchasing Managers Index, which is expected at 50.0.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
