The Canadian dollar was uninspired in overnight trading. Prices tracked broad U.S. dollar moves, as usual, and those moves were dictated by U.S. Treasury yields and broad risk sentiment.
Friday, Canadian Retail Sales rose 2.1% in August, as expected. However, enthusiasm was tempered by StatsCan’s preliminary guess for September, which is for a drop of 1.9%. The Canadian dollar retreated from its session peak on the news.
The domestic report was all but forgotten in overnight markets. Traders were digesting U.S. Federal Reserve Chair Powell’s comments on Friday which did everything but confirm the onset of Quantitative Easing tapering at the November Federal Open Market Committee meeting, while implying he was becoming a tad more concerned about elevated inflation levels.
The U.S. dollar garnered a bit support after U.S 10-year Treasury yields halted their slide in Asia and climbed from 1.634% to 1.654% in New York.
The U.S. dollar saw a bit of safe-haven demand after Turkey President Erdogan said he would expel ten diplomats including the US and Canadian ambassadors. However, most of the demand was against the Turkish Lira which lost 2.5% overnight.
EUR/USD dropped from $1.1664 to $1.1621 in early New York. The weaker than expected German Ifo survey and firming U.S. Treasury yields weighed on prices. The Ifo Institute said, "Sentiment in the German economy has clouded over.
"The Ifo Business Climate Index fell from 98.9 points in September to 97.7 points in October. Skepticism is increasingly evident in expectations. Companies assessments of their current situation are also less positive. Supply problems are giving businesses headaches.”
The report may temper any hawkish leanings by the European Central Bank on Thursday. The intraday EUR/USD technicals warn that a drop below $1.1610 would extend losses to $1.1550. GBP/USD see-sawed in a $1.3744-$1.3791 range and is near the bottom of that band in early New York trading.
Prices are supported by expectations for a hawkish BoE meeting next week but offset by concerns that supply chain disruptions will derail economic growth. Brexit is becoming frothy again. The European Union is said to be considering terminating the Brexit trade deal due to the U.K.’s threat to trigger Article 16 of the Northern Ireland protocol.
AUD/USD and NZD/USD tracked broad U.S. dollar moves and both currency pairs are trading just below their session peaks.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
