The Canadian dollar extended yesterday’s gains overnight.
USD/CAD dropped from $1.3264 to $1.3231, due to a modest improvement in global FX risk sentiment. U.S. Speaker of the House Nancy Pelosi and Treasury Secretary Steven Mnuchin are reportedly having discussions today about implementing a narrowly focused COVID-19 Relief plan. President Trump got the ball rolling Tuesday when he tweeted his support for a Stand Alone Bill for Stimulus Cheques.
Wall Street endorsed the developments by powering the Dow Jones Industrial Average to a 1.9% gain. Asia equity markets followed suit, although China’s markets were still closed for Golden Week holidays. The equity rally continued in Europe. The major indices are higher but off their best levels. US equity futures suggest a positive open on Wall Street.
The Federal Open Market Committee minutes were not enlightening. The committee is far from unified in its outlook for economic growth and inflation and spent a lot of time debating how they would communicate the message to markets.
The focus shifted to the vice-presidential debate. Incumbent Mike Pence squared off with Kamala Harris, in a more civilized manner than the earlier Trump/Biden debate. Even so, it was a non-event for markets.
In Europe, renewed coronavirus fears, Brexit, and dovish comments from European Central Bank officials trapped EUR/USD in a narrow $1.1753-$1.1781 range. ECB Vice-President Luis de Guindos reinforced the bank’s dovish bias saying: "Inflation expectations are very subdued as a result of the pandemic and some specific factors and we have to act with the tools available to us."
GBPUSD rallied to $1.2969 then hit a wall on Brexit gamesmanship. EU Chief Negotiator Michel Barnier hinted that he thought the U.K.’s threat to leave was a bluff when he said he didn’t expect them to walk. Prime Minister Boris Johnson took umbrage at the comment and retorted that the U.K. would definitely walk if a satisfactory deal was not reached.
GBP/USD dropped to $1.2905 in Toronto trading.
The possibility of a limited COVID-19 stimulus plan in the U.S. propelled AUD, NZD, and CAD higher against the US dollar. AUD/USD was the best performing currency overnight, although its gains were marginal.
Bank of Canada Governor Tiff Macklem’s speech is titled "The Global Risk Institute and the evolution of risks during a pandemic." It is not likely to have much impact on the Canadian dollar as currency direction is dictated by U.S. dollar sentiment.
U.S. weekly jobless claims data today was forecast at 830,000. Better than expected results may improve the positive risk sentiment tone.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
