The Canadian dollar dropped in Asia, alongside the antipodean currencies. The catalyst for the move was a bout of risk aversion trading after Wall Street’s selloff on Tuesday. The NASDAQ dropped over 4.0% as tech stock continued to give back summer gains. The debate is raging as to whether the selloff is a correction or the start of a bear market.
Falling oil prices may have exacerbated Canadian dollar weakness, but the bulk of the selling pressure came from broad U.S. dollar strength.
The British pound has been the worst-performing G-10 currency this week. That’s because the U.K. government decided to go back on the European Union withdrawal agreement.
GBP/USD dropped to levels last seen in July when prices hit $1.2894 in Asia. Traders are on hold until today’s release of the Internal Markets Bill. The bill will detail the governments plans to ensure that trade between all Great Britain remains barrier-free, which includes Northern Ireland. This plan will change the terms of the E.U./U.K. withdrawal agreement. The E.U. is extremely unhappy with the U.K.’s plans to change the exit deal. Prime Minister Boris Johnson is insistent that the U.K. is prepared to leave without a deal.
Selling of GBP/USD underpinned the U.S. dollar against the other G-10 major currencies. EUR/USD losses were slowed by demand for EUR/GBP. Nevertheless, EUR/USD is trading just above strong support in the $1.1750-60 area. A break below this level targets $1.1700.
The Bank of Canada policy meeting shouldn’t matter to FX traders. The BoC is universally expected to leave interest rates unchanged at 0.25%. There isn’t even a press conference, which suggests there are not any important announcements or changes in policy. However, Governor Tiff Macklem speaks tomorrow, and his remarks may provide some more clarity to today’s statement.
AUD/USD and NZD/USD trade similarly to the Canadian dollar, both sank, then recovered heading into the Toronto open. AUD/USD was underpinned by better than expected Consumer Confidence data which was 18% compared to the previous 9.5% decline.
New Zealand’s Business Confidence Index improved, but it is still in negative territory, in part because of coronavirus containment measures.
U.S. President Donald Trump has been nominated for the Nobel Peace Prize by a Norwegian politician because of his efforts to secure a peace agreement between Israel and the United Arab Emirates.
There are not any economic reports of note today.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
