The Canadian dollar did not participate in yesterday’s broad-based U.S. dollar selloff. Part of the reason may be due to weak domestic inflation and retail sales reports. Statistics Canada said “The Consumer Price Index (CPI) rose 0.5% on a year-over-year basis in September, up from a 0.1% increase in August. Excluding gasoline, the CPI rose 1.0% in September, following a 0.6% increase in August. The acceleration in the CPI was largely due to price changes in transportation, recreation, education and reading, and shelter components.” It doesn’t matter how they spin it; the data is weak and well below the Bank of Canada’s stated objective of a 2.0% inflation rate.
The 0.4% m/m increase in August Retail Sales was below the forecast of a 1.1% m/m increase. It was even more disconcerting as renewed coronavirus lockdown measures in parts of Ontario and Quebec in September suggest weak performance in the coming months.
GBP/USD rallied hard yesterday, rising from $1.2970 to $1.3170.
Traders scrambled to buy GBP/USD after European Union and U.K. officials expressed their belief a Brexit trade deal is likely. Prices started to retreat in the New York afternoon after traders realized that the move was overdone due to the lack of any solutions to previous sticking points
(i.e. Fishing, Subsidies, Irish border) and aversion sentiment.
A whiff of risk aversion rippled though markets late yesterday afternoon and continued overnight. The FBI accused Russia and Iran of meddling in the U.S. election, which should not be all that surprising. That news allowed the U.S. dollar to claw back some of yesterday’s losses.
EUR/USD was on the defensive in late Asia trading and during the European session. It continued in early New York trading with prices dropping from an overnight peak of $1.1866 to $1.1817, which brings us back to Tuesday’s New York opening level. The resurgence of COVID-19 lockdown measures in many parts of Europe and dovish European Central Bank monetary policies are capping gains.
The Canadian dollar ignored oil price action. West Texas Intermediate prices have bounced between $39.70/barrel and $41.80/b since Tuesday. Oil supply concerns from Hurricane Delta were offset by a smaller than expected decline in U.S. inventories.
The weekly U.S. Jobless claims forecast is for a decline to 860,000 from last week’s 890,000 result. The news will have limited impact on FX markets as the focus is on coronavirus concerns, hopes for a COVID-19 Relief package, and the U.S. election.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians