Canadian dollar gains lagged those of the G-10 majors overnight, but the currency is trying to make up lost ground in early Toronto trading.
USD/CAD traded with a negative bias in a $1.3105-$1.3176 range overnight. Prices resumed their decline in Toronto trading, dropping to 1.3057, fueled by fierce US dollar selling against the G-10 majors. The Canadian dollar rally Is not a domestic story, but a U.S. election tale.
The Presidential election remains undecided. Neither Joe Biden nor President Trump has declared victory, but both men indicated that they believed they won. The Trump team is challenging results in Pennsylvania, Michigan, Wisconsin, and Georgia.
The Federal Open Market Committee meeting is today. It is likely going to be a non-event. Fed Chair Jerome Powell and his colleagues are on record saying interest rates will be unchanged for a long time, which eliminates any urgency from today’s meeting.
The Bank of England monetary policy meeting as an "event." The BoE increased its quantitative easing program, which it broadly hinted at doing in pre-meeting speeches, and comments to the press. Yet, members surprised themselves. They increased the Quantitative Easing program by £150 billion, surpassing their "hinted at" target of 100 billion pounds
GBP/USD traders shrugged of that news, along with weaker than expected Construction Purchasing Managers Index data and bought GBP/USD from $1.2935 to $1.3095 in Toronto.
The gains are on the back of sharply improved global risk sentiment, and hopes for an EU/UK trade deal.
Global markets appear to be sick of news of people getting sick.
The US reported a record 104,004 new Coronavirus cases yesterday, and it didn’t even cause a ripple in global risk sentiment. COVID-19 fatigue, perhaps.
EUR/USD rallied hard, rising from its Asia low of $1.1711 to $1.1846 in Toronto. The increased odds that Joe Biden will win the election led to widespread gains in global equity markets and gave the so-called risk-assets a boost. Prices got an added lift when the short-term EUR/USD technicals turned bullish after breaking above $1.1770. A decisive break above $1.1880 targets $1.2000.
The only U.S. data of note is the weekly jobless claims report. It will be overshadowed by election news. The Canadian economic calendar is empty.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
