The Canadian dollar traded erratically in a wild, overnight FX session. USD/CAD plunged to $1.3098 in Asia as it tracked broad U.S. dollar moves. The greenback was sold aggressively on the back of early U.S. election results, in hopes Joe Biden would lead a "Blue Wave" into the White House. Traders quickly realized that it wasn’t going to be that easy. USD/CAD soared and reached $1.3298 at the European open.
Prices started to decline as results showed Joe Biden with a small lead over President Trump, and USD/CAD dropped to $1.3148 in early Toronto trading.
Not surprisingly, the U.S. election was the major focus for markets overnight. Markets ignored economic data. The U.S. election is far from decided. Once again, the polls were wrong, and wrong in a big way. Predictions of a Democratic sweep of the White House, Senate and House of Representatives, looked foolish in the harsh light of the post-vote morning. The Senate race is tied with both parties winning 47 seats (as of 6:00 am ET) with six seats not yet determined. The House is still up for grabs. The Democrats had the majority before the election, but at last count, they had lost four seats. The votes are still being tabulated.
There are still several key states counting ballots, and President Trump has not conceded. Far from it. He said to supporters in the early hours today "Frankly, we did win this election."
USD/JPY price action was wild, especially for a currency pair that struggled to move more than 0.30 points a day for the past week. USD/JPY soared to 105.34, after closing in Toronto at 104.51.
That spike coincided with a rise in U.S. 10-year Treasury yields from 0.90% to 0.94%. However, as U.S. election results started to hit the news wires, the 10-year yields plunged sharply, falling to 0.78%. USD/JPY slid as well, dropping to 104.38, and leaving the currency pair locked in its well-defined 104.00-104.50 range.
EUR/USD and GBP/USD traded in tandem. Both currency pairs tracked the U.S. election, rising and falling as results were reported. Eurozone Purchasing Managers' Index data was ignored, while weaker than expected UK Services PMI data contributed to the GBP/USD selloff.
The U.S. election results will continue to be the focus for markets today.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
