The home on the range is where the buffalo roam and where deer and antelopes play, and as of late, where the Canadian dollar rests. The loonie has been trapped in a narrow USD/CAD range of $1.3260-$1.3325 for the past week as buyers and sellers search for direction.
Yesterday, Canadian Wholesale Sales rose 1.0%, well above the 0.4% forecast and much better than the August result of -1.2%. Statistics Canada noted that in the third quarter, the 0.8% sales increase was the 14th consecutive quarterly rise. The Canadian dollar enjoyed a rally, but those gains were fleeting, and the currency pair closed on Monday exactly where it opened.
U.S. Federal Reserve Chair Jerome Powell contributed to a minor shift toward the so-called “risk assets” during the Asia session. Powell told an audience in Rhode Island, “At this point in the long expansion, I see the glass as much more than half-full. With the right policies, we can fill it further, building on the gains so far and spreading the benefits more broadly to all Americans.” He repeated the Fed mantra of “the current stance of monetary policy is appropriate.” Powell didn’t say anything new.
Market risk sentiment took a turn for the better on signs of progress in the U.S./China trade negotiations. Unnamed White House officials are suggesting that despite the drama, a Phase 1 trade deal is close. That echoes a story in China’s Global Times suggesting that the two sides have basically reached a consensus on a deal including tariff removal. The upbeat sentiment was tempered by news that China summoned the US Ambassador to express their disapproval of the U.S. meddling in Hong Kong.
USD/JPY rallied on the news of the trade progress but was unable to sustain the move. Prices retreated in Europe, and they opened in New York just above the overnight low. A tiny drop in 10-year U.S. Treasury yields contributed to the USD/JPY selling pressure.
GBP/USD rallied on U.K. election drama yesterday and then gave back those gains overnight on the latest election news. Officials from Ireland’s DUP hinted it could be persuaded to support a Labour minority government if Jeremy Corbyn was not the Labour leader. GBP/USD dropped to $1.2853 from $1.2902 before climbing to $1.2870 in early Toronto trading.
EUR/USD is struggling to find direction. Prices have been unable to sustain losses below $1.1000 but at the same time, unable to gain any traction above $1.1030.
There is a lot of U.S. data released today and tomorrow, but they may not have much impact due to the proximity of the U.S. Thanksgiving holiday.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians