USD/CAD - Canadian Dollar Rangebound

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The Canadian dollar bounced off resistance in the USD/CAD $1.3230 area yesterday and has been drifting lower since. Canada’s Merchandise Trade deficit widened to $3.19 billion from -$1.33 billion and combined with a whopping $348.0 billion budget deficit, doesn’t bode well for future currency gains if it persists.

U.S. weekly jobless claims data due today are forecast to drop modestly from 1.434 million last week to 1.414 million today. However, yesterday’s weak ADP employment report which said the U.S. only added 167,000 jobs in July, compared to the 1.5 million expected, raised concerns about today’s data and the July non-farm payrolls report.

President Trump’s administration has failed to find a replacement for the expired CARES Act, which is leaving millions of unemployed Americans in the lurch. The Democrats and Republicans are grandstanding, hoping to score election points. Trump is threatening to act unilaterally, considering plans for eviction protection and payroll tax cuts. The political impasse is undermining the U.S. dollar.

Overnight, FX markets didn’t stray too far from where they closed. COVID-19 flare-ups in France, Britain and the U.S. are cause for concern, as are ongoing China and "most of the free-world" hostilities. It wasn’t enough to spark a U.S. dollar rally, but it put the brakes to broad U.S. selling.

The major Asian equity indexes closed with small losses, and European bourses are also in the red. U.S. equity futures are also down. WTI oil traded in a $41.64-$42.42/barrel range and underpinned by the weak US dollar and Wednesday’s news that US crude inventories fell by 7.37 million barrels. Gold traded steady in a $2,043.89-$2,053.91 range supported by the weak U.S. dollar, low global interest rates, and a dash of safe-haven demand from geopolitical tensions.

The British pound rallied in a was the best performing currency overnight. GBP/USD rallied in a $1.3114-1.3184 range underpinned by today’s Bank of England (BoE) announcement. The BoE said the second-quarter economic slump was "less severe" than feared. It upgraded the 2020 forecast for unemployment from 10.0% to 7.5% and improved its 2020 growth forecast to -9.5% from -14%. Governor Baily appeared to dismiss negative interest rate concerns when he said he "did not think we are about to use negative rates, that is not the current plan."

There are no Canadian economic data releases scheduled today.

Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
Learn how KnightsbridgeFX can help you save up to 2% when buying or selling US dollars compared to your Canadian bank’s rates – click here to compare bank rates