Canadian Dollar Update October 12, 2018
USD/CAD Open: 1.3027-1.3028
The Canadian dollar inched higher overnight supported by a rebound in global equity markets. Wall Street suffered more losses yesterday but not on the magnitude of the losses incurred on Wednesday and for Asia traders, that was a good sign. Asian equity indices recouped some of this week’s losses in what may have been just pre-weekend profit taking rather than a change in sentiment. Nevertheless, the improved equity tone spilled over into FX markets.
Overnight FX markets were choppy but with somewhat reduced volumes. The US dollar is slightly weaker against the major G-10 currencies from where it closed on Thursday in early Toronto trading. The New Zealand dollar was the biggest gainer. Those currencies were large “underperformers” when US 10-year Treasury yields were above 3.25%. They are at 3.17% this morning which has fueled the rally.
The Canadian dollar did not react to yesterday afternoon reports that the United Kingdom and European Union were close to a Brexit deal. The Financial Times headline said “UK and Brussels close to agreeing Brexit deal.” GBPUSD rallied but reversed those gains, in part because of skepticism that the UK government could get the deal passed by parliament. Regardless, the news was positive and helped to generate a positive risk tone in global financial markets.
The global risk outlook took a turn for the better following reports that the US Treasury Department will not label China as a “currency manipulator.” President Trump has often accused China of manipulating its currency, and it remains to be seen if he will accept the Treasury Department findings. The US/China trade war may be cooling a tad. There are reports that Trump and China President Xi Jinping may meet at the G20 meeting in Argentina on November 30.
Oil prices have rebounded again despite yesterday’s Energy Information Administration report that US crude inventories rose 5.987 million barrels in the week ending October 5. The adjustment period for exemptions to Iran sanctions ends on November 4. The loss of Iranian crude and US supply disruptions from Hurricane Michael have underpinned prices.
The Canadian dollar has not benefited from the recent rally in oil. Western Canada Select, Canada’s chief oil export is trading at a $46.15 discount to WTI. Canadian only receive around $30/barrel for their crude.
There isn’t any Canadian economic data of note released today, and the US data is second tier. Michigan consumer Sentiment is expected to rise to 100.4 from 100.1 in August. FX traders will take direction from equities. JPMorgan Chase kicked off earnings season with better than expected numbers. US equity futures are higher pointing to a positive open on Wall Street
Today’s Suggested Range: 1.3000 – 1.3099 USD/CAD
By Admin | October 12, 2018 | Daily Update |
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