The Canadian dollar lost 0.44% of its value against the U.S. dollar between Friday’s close and today’s Toronto open. The losses did not have anything to do with domestic data or politics.
Instead, the currency sank under a wave of mild safe-haven demand for U.S. dollars.
A second-wave coronavirus outbreak has dampened risk sentiment. Spain entered a state of emergency with a nationwide curfew from 11-to 6:00 a.m.. The U.S. recorded 148,386 new positive tests on the weekend.
China ratcheted up the geopolitical tension meter by saying it would impose sanctions on U.S. companies supplying war materials to Taiwan. Other geopolitical flashpoints included France and Turkey, and the European Union and Belarus. France recalled its ambassador to Turkey after Turkish dictator Erdogan questioned French President Macron’s mental health.
FX markets continue to be cautious ahead of a possible new U.S. COVID-19 Relief stimulus package. U.S. officials on both sides of the divide continue to suggest that a deal is possible.
Traders are also counting down the days to November 3, when the U.S. election campaign finally ends.
GBP/USD dropped in Asia and rallied in Europe and early Toronto trading. GBPUSD fell from 1.3043 at Friday’s close to 1.2994 in Asia before soaring to 1.3074.
Brexit talks are continuing, raising hopes of a trade deal, letting Britain avoid a “hard-Brexit.” German Chancellor Angela Merkel and other E.U. leaders are pressuring France to avoid vetoing any agreement because of fishing rights.
EUR/USD sank under the weight of weak German economic data, and EUR/GBP selling. The German IFO Survey was weaker than expected. The Business Climate Index was 92.7 compared top 93.2 in September. German businesses were more skeptical about developments in the coming months.
Turkey is fast-becoming NATO’s problem child. Turkey is a NATO member, and it is picking a fight with Greece, also a NATO member. The E.U. has sided with Greece, and the Turkey/France spat exacerbated the situation. These concerns are acting as a drag to EURUSD gains.
Canadian dollar price action will continue to mirror U.S. dollar moves against the majors. There are not any domestic economic reports available today.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians