The Canadian dollar continued to rally overnight, albeit at a much slower pace. USD/CAD dropped from $1.2477 to $1.2437, where it is trading in Toronto. Canadian dollar gains continue to be fueled by high oil prices and recent data suggesting that the Bank of Canada will normalize monetary policy sooner than expected.
China’s trade surplus widened to $66.76 billion, powered by a 28.2% y/y rise in exports. However, imports only rose 17.6% compared to August's 33.1% increase. The results helped China’s Shenzhen CSI 300 index record a 1.15% gain, even as the other major Asia indexes posted losses.
Traders are cautious ahead of September U.S. Consumer Price Index data. The consensus estimate for Headline CPI and Core CPI is unchanged from August at 5.3% y/y and 4.0%, respectively. However, some analysts warn that the risk is for an above-consensus result. If so, U.S. dollar losses will be recovered quickly.
The minutes from the September 22 Federal Open Market Committee meeting are released at 2:00 pm ET. Traders will be looking for further insight to reinforce their view that the Committee turned hawkish and plan to begin tapering asset purchases in November.
EUR/USD climbed from an overnight low of $1.1530 to $1.1566 where it is trading in New York due to pre-CPI position adjusting and a dip in U.S. Treasury yields. However, gains may be limited as European Central Bank officials insist that inflation is transitory and that monetary policy needs to remain accommodative. The intraday EUR/USD technicals are bullish but need to break above 1.3680 or risk retreating to $1.3550.
GBP/USD rallied to $1.3643 from $1.3577. August Gross Domestic Product rose 0.4% m/m, which was a tick below the 0.5% m/m expected. Some analysts suggest that the data is indicative of an economy that is more sluggish than the Bank of England anticipated, which removes pressure for a near-term rate hike.
GBP/USD traders are also cautious as EU/UK post-Brexit tensions flare over Northern Ireland border checks and the UK/France fishing dispute.
USD/JPY broke above 112.00 on Monday and hasn’t looked back. Prices are trading at 113.54, a level last seen in December 2018. The move was sparked by the steep rise U.S. Treasury yields, with the 10-year climbing from 1.46% on October 3 to 1.625% yesterday. Prices dipped to 1.568% today, but USD/JPY traders have ignored it so far.
The Canadian data calendar is empty.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
