The Canadian dollar is an after-thought in the context of global FX trading. Its moves are directed by commodity currency and EUR/USD price action, with domestic influences ignored.
The Bank of Canada’s monetary policy meeting on Wednesday came and went without causing a ripple in FX markets. That’s because the BoC didn’t do anything or offer any useful insight.
The bank left interest rates unchanged at 0.25% and did not make any alterations to the quantitative easing program. It acknowledged that the second-wave pandemic might weigh on growth in Q1 2021. If there were any concerns that they would alter its interest policy, they were dispelled by the statement headline. It read “Bank of Canada will maintain current level of policy rate until inflation objective is achieved, continues its quantitative easing program.”
GBP/USD saw fireworks again. The currency pair closed at $1.3407 yesterday, and promptly tanked in Asia, dropping to $1.3325, after reports surfaced that U.K. Prime Minister Boris Johnson and European Union Commission President Ursula von der Leyden did not reach an agreement of outstanding Brexit issues. Prices rebounded to $1.3385, then slipped steadily, touching $1.3275 in Toronto today.
The Brexit negotiations have been extended to December 18, which, like all previous deadlines, is probably fluid.
The U.K. released a host of economic reports. The results were mixed and overshadowed by the Brexit drama.
EUR/USD is trading with a modestly negative bias, and consolidating losses after failing to break above $1.2150 yesterday. Prices climbed to $1.2110 in Europe, but concerns around today’s European Central Bank and EU Commission meetings weighed on the single currency. The EU Commission is expected to pass the €750.0-billion COVID-19 Relief legislation, which is modestly supportive for EUR/USD.
The ECB left interest rates unchanged. The deposit rate is -0.5%. The bank also announced it was increasing the Pandemic Emergency Purchasing Program by €500 billion, for a total of €1.850 trillion. It also announced it was extending the term of Targeted Longer-term Refinancing Operations (LTRO lll). EUR/USD jumped from $1.2082 to $1.2110 on the news. Traders are now awaiting President Christine Lagarde’s press conference.
USD/JPY inched higher, rising from 104.25 to 104.57, supported by steady to firm U.S. Treasury yields and Japanese corporate demand for dollars.
However, the USD/JPY technical picture is bearish while prices are below 104.70.
AUD/USD rallied from 0.74029 to 0.7493 after steady Consumer Inflation Expectations data and broad-based U.S. dollar weakness.
Today’s U.S. Consumer Price Index and Jobless claim data will be overshadowed by news of surging coronavirus cases and stock market performance.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians