The Canadian dollar is inching higher in early Toronto trading. USD/CAD closed Friday at $1.3178 and prices drifted lower due to broad U.S. dollar weakness compared to the major G-10 currencies. Canada Retail Sales data, released Friday, were as impressive as predicted, rising 23.7% in June. Pent-up demand from the coronavirus lockdowns fueled the gains which boosted sales to above pre-pandemic levels.
The Conservative Party of Canada elected Erin O’Toole as leader, replacing Andrew Scheer. The news was not a factor in FX markets.
Instead, traders were looking ahead to the annual Jackson Hole Symposium, hosted by the Federal Reserve Bank of Kansas City. It begins on August 27.
This year’s summit is different as it is an online event. The theme is “Navigating the Decade Ahead: Implications for Monetary Policy. As usual, there are a lot of speeches by central bankers. Bank of Canada Governor Tiff Macklem, Fed Chair Jerome Powell, and Bank of England Governor Andrew Baily's speeches will be followed closely. Headlines from the lectures could spark FX volatility.
EUR/USD is trading at the top of its $1.1786-$1.1846 range, bolstered by improved global risk sentiment. Reports that U.S. President Trump wants to fast-track and experimental UK COVID-19 vaccine boosted hopes for an early end to the coronavirus crisis. The gains are underpinned by expectations a Eurozone recovery will outperform that of the US, mainly because U.S. politicians are focused on the upcoming election, and not the economy.
Thursday's increase in Jobless Claims numbers supports the view that economic growth is stalling. However, EUR/USD gains are being capped ahead of significant resistance in the $1.2000-$1.2010 area. That is due in part because of geopolitical concerns, which include an escalation of tensions between Greece and Turkey. Also, political turmoil in Belarus pits Russia against the EU.
GBP/USD hasn’t recovered from Friday’s plunge from $1.3260 to $1.3059. Fears of a "No-Deal" Brexit soared when EU Chief Negotiator Michel Barnier warned he didn’t think an agreement was likely. GBP/USD climbed to $1.3135 in Toronto today, due to broad U.S. dollar selling pressures.
USD/JPY traded sideways in a narrow 105.70-93 range. Improved global risk sentiment supported prices while soft US Treasury yields capped gains.
AUD/USD outperformed New Zealand and Canadian dollars. NZD/USD dipped following weak Retail Sales data, while the ultra-dovish outlook by the central bank continues to pressure the currency.
The U.S. and Canadian economic calendars are empty today.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
