The Canadian dollar added to yesterday’s gains as traders around the globe embraced positive risk sentiment.
Wall Street closed with hefty gains on Thursday due to a mix of data and solid quarterly earnings reports. Weekly jobless claims fell 39,000 to 293,000, which is the lowest level since March 14, 2020. Traders liked the result, which supports the view that the US economy continues to rebound. Strong U.S. bank earnings gave the S&P 500 index its best day since March.
The major Asia equity indexes closed with steep gains. Japan’s Nikkei 225 index finished with an increase of 1.81%, followed by a 1.40% rise in Hong Kong’s Hang Seng Index.
Those gains were helped by comments and actions by the Peoples Bank of China (PBoC), which took additional steps to stabilize markets. The PBoC injected $500 billion in one-year Medium Loan Facility to offset a maturity of the same amount. Officials said that risks to the financial system from Evergrande were controllable. The PBoC also relaxed banks reduced the cash banks need to hold in reserve while also reducing mortgage limits.
European traders were less enthusiastic. The major bourses are higher but below their best levels and with gains well below those seen in Asia. U.S. equity futures point to further progress on Wall Street today.
Rising equity indexes and another jump in oil prices gave the loonie wings. USD/CAD dropped to $1.2339 overnight, extending the slide from October 8, when it opened $1.2650.
West Texas intermediated closed at $81.41 and climbed to $82.27 overnight. The Energy Information Administration report that U.S. crude inventories rose six million barrels was ignored. Traders were more concerned with global stocks. Organization for Economic Cooperation and Development (OECD) stockpiles are at their lowest levels since 2015. Even worse, the International Energy Institute (IEA) said oil demand will rise by 500,000 barrels/day.
EUR/USD is trading in a $1.1589-$1.1617 range, but dovish comments from European Central Bank policymaker Pierre Wunsch helped cap gains and knock prices down to $1.1600 in New York.
GBP/USD benefits from positive risk sentiment and ongoing speculation that the Bank of England will need to raise rates earlier than previously expected. GBPUSD is in aa mild uptrend above 1.3570.
Canada releases Wholesale Sales data for August, while the U.S. data includes Michigan consumer confidence, Import/Export price index, New York Empire State Manufacturing Index, and Business Inventories.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
